Money & Banking

Srei Infra to focus on co-lending, leasing to scale up revenue

Kolkata | Updated on November 18, 2019 Published on November 18, 2019

Awaits clarity on converting into a bank

Srei Infrastructure Finance, which is exploring the possibility of converting into a bank to give the much-needed push to its business, is awaiting for regulatory clarity on the same. Meanwhile, it will focus on leasing and co-lending businesses to scale up its revenue.

According to Sunil Kanoria, Vice-Chairman, Srei, it is exploring the possibility of entering into a partnership for its asset financing and leasing business.

“We had attempted that (converting into a bank) in the past….we will be open to look at it if the regulatory system allows that. But at the moment, not assuming anything of that sort happens, we have to put our house in order and that is what we are working on for the last one year,” Kanoria told BusinessLine.

With a view to consolidating its lending operations into one entity, Srei Infrastructure Finance had recently hived off its lending business into subsidiary company, Srei Equipment Finance. The aim was to grow the equipment finance business and reduce the infrastructure loan portfolio.

The move would also help Srei Equipment attract strategic investors and prepare the company for conversion into a bank, as and when the Reserve Bank of India decides to allow systematically important NBFCs to convert into banks, the company had said earlier.

Merging NBFC into a bank would help mitigate the systemic risk and also aid in scaling up growth.

Citing instances of some NBFCs such as Capital First, which merged with IDFC Bank, and Gruh Finance, which is set to be merged into Bandhan Bank, he said the regulator should proactively push it just like the government pushed the merger of public sector banking system to strengthen them and rationalise the cost structure.

“An NBFC is like a caterpillar and a bank is a butterfly, so if you have to fly you have to transform into a butterfly and the ecosystem should allow that transformation,” he said.

Co-lendin business

Srei, which has been reducing its focus on infrastructure financing, would continue to sell assets, thereby releasing capital and focus more on asset financing and leasing business.

“We believe there is a strong value proposition for that (asset finance and leasing). We will look at partners, whether domestically or globally,” he said.

Srei Equipment had BNP Paribas as its JV partner till around 2015 after which it exited the JV in lieu of a 5 per cent stake in Srei Infrastructure.

Asset leasing, which was earlier not considered to be not a very lucrative business due to tax-related issues, is now a viable model. The company started growing its leasing portfolio after GST kicked in and has a book of around ₹6,000 crore, when compared with Srei Equipment’s AUM of around ₹46,500 crore. “We are building that (leasing business) up. At the moment we are facing challenges in regulatory environment, but if that ecosystem builds up I would love to write more leases. Our core focus would be to become a 90 per cent leasing company,” he said.

The co-lending model has also been picking up, and the company has tied up with as many as eight banks. From ₹40 croer to 50 crore a month in early February and March, the company is able to co-lend close to ₹200 crore every month. The aim would be to grow it to ₹1,000 crore a month in the next one year.

Published on November 18, 2019
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