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Srei Group, part of the Kanoria Foundation, has entered into a MoU with New Zealand's CBL Corporation to set up a 50:50 joint venture to offer surety and guarantee products in India.
The first-of-its-kind joint venture will offer performance guarantees and sureties to customers in India for participating in projects in the infrastructure and allied sectors.
The unique offering will reduce working capital needs of the players and facilitate project completions without delays, and allow them to grow their businesses.
Commenting on the joint venture, Sunil Kanoria, Vice-Chairman, Srei Infrastructure Finance Ltd, said: “We are very proud to partner with CBL Corporation Ltd to offer this unique financial solution (performance guarantee or surety) to Indian businesses”.
He highlighted that in developed nations like the US, Canada, Germany, a Bid Bond or Surety or performance guarantee is a part of pre-qualification criteria for bidders, especially for government sponsored infrastructure products.
“In India, the market for such instruments has not yet developed. As of now, only banks provide such instruments in India and there is an urgent requirement to develop such products and offerings here,” he added.
Alistar Hutchison, Deputy Chairman, CBL, said India is a vibrant and growing country full of special people. CBL and Srei Group’s joint venture would add to India's growth aspirations by giving India's businesses greater options in the guarantee and bonding sector.
Vikash Khandelwal, CEO of the proposed joint venture, told BusinessLine that talks are on with the regulator (Reserve Bank of India) to see if the joint venture could be registered as a separate category of NBFC such as NBFC-guarantees. Currently, RBI has separate category for mortgage guarantees as NBFC-mortgage guarantees. India Mortgage Guarantee Corporation (IMGC) is the only registered entity under this category.
Khandelwal said the proposed joint venture is looking to provide guarantees beyond mortgages and therefore would prefer a separate categorisation by the regulator. How a pure-play guarantee company gets categorised under RBI’s regulatory framework for NBFCs is crucial as it has a bearing on the extent of capital adequacy ratio that should be maintained by a company.
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