We will focus on equipment financing in future: Sunil Kanoria, SREI Infrastructure Finance

The fall in the stock prices of SREI Infrastructure Finance is a matter of concern and if you have a look then you will find that there is a change in the business environment in NBFC sector after weakening of IL&FS, in September 2018, says Sunil Kanoria, Co-founder and Vice Chairman, SREI Infrastructure Finance Limited. In an interview with Swati Khandelwal, Zee Business, Kanoria said “we are disrupting our business to embrace technology and are focusing on the ways to re-build our business amid the ongoing environment. Edited Excerpts: 

Q: The company is into equipment financing business but when I have a look on the stock prices of the company then I find that it has declined to Rs16 in contrast to the 52 weeks high of Rs 58. What is the company’s outlook and is the declining valuation of the stocks is a matter of concern for you? 
A: Yes, this is a matter of concern and if you have a look then you will find that the business environment for NBFCs has changed completely since September 2018. The financial sector thrives on the sentiments of trust and confidence and this sentiment turned negative after the weakening of IL&FS in last September. Moreover, we were focused on the infrastructure sector and this focus led to a more negative impact on our stocks. It is true that in the last 8-9 months, it was difficult for us to gain money which is our raw material. Neither the bond market hasn’t opened properly and nor getting any support from the banking system. Therefore, it is a time when we should introspect ourselves and analyse the ways to get proper financing and we are focused on that and this transition can take some time. The work is in progress. Also, we are working along with many banks on the co-lending program opened by the Reserve Bank of India. Interestingly, eight banks have tied up with us in this co-lending program. We are also disrupting our business to embrace technology and are focusing on digital. We had a program last week that helped us to make a business of more than Rs600 crore in one day through our partners of the co-lending process. So, we are re-working on our business as we cannot change the environment but can change ourselves. We are focusing on the ways to re-build our business amid the ongoing environment. This was a sudden shock for India as well as the NBFC sector. I think, we will remain engaged in it as it will take some quarters, which will be followed by gradual improvement. 

Q: After the IPO plan failed, we have seen that the company has decided to undertake its lending business in a wholly-owned subsidiary. Will this mean that the company will focus on equipment finance and step back from core infra finance as many others have changed their business model and strategies after the IL&FS shock? 
A: Since the past 2 years, we have been saying that we have virtually closed or slowed down the infrastructure financing business and are exiting from it. This slump exchange is being done to get an operational efficiency and our infra book has reduced significantly. Entering SREI Equipment will help us in using our lines in it. The resources released from the existing portfolios will be used in equipment financing. This will help us in reducing our operational expenses and rationalise things and this is why we have gone for slump exchange. Surely, we will be focusing especially on equipment financing in future. I believe that if India has to grow than the scope of equipment has to grow though there is a slight slowdown in the market since the last 5-6 months because we don’t have resources on our liability side. I think the conditions will improve further. 

Q: As you have signed a Rs 210 crore pact of loan refinancing with a bank from the Netherlands for the investments in Renewable Energy Projects as well as you had a pact with PTC India Financial services for energy project financing. Will energy be an important aspect for you in future?
A: Our focus will remain on equipment financing. As far as the pact with PTC India is concerned, then we will like to share the experience that we have gained in the infrastructure sector in the last 30 years. Thus, under the pact, we will be using our knowledge including the team on advisory for the upcoming projects for PTC and other institutions and sponsors and get the financing. We will get fee earning in this process as we will not use our capital there. 

Q: How much recovery has been possible in your exposure of the Rs 1,000 crore in IL&FS?
A: It has been initiated and as there was a moratorium, many projects have turned green and have been allowed by the courts. As this gradually resolves, we expect the recovery.