Srei's growth slowing down over weak market sentiment: Group chairman

Kolkata-based Srei group, which moved away from infrastructure finance, is likely to see its growth in asset portfolio slowing down to 5-7 per cent this year.

This is in contrast to the 20-30 per cent growth it recorded prior to the IL&FS crisis.

Currently, 75 per cent of its asset holding is for equipment finance, with the remaining coming from infrastructure financing. The share of infrastructure project finance is expected to further come down to 10-15 per cent in the coming years, Hemant Kanoria, Chairman, Srei group, told Business Standard.

The group’s consolidated asset under management (AUM) for quarter ending June 2019 was Rs 47,237 crore of which Srei Infrastructure Finance Ltd (SIFL) was Rs 17,458 crore while Srei Equipment Finance was Rs 31,511 crore.

In fact, the consolidated AUM fell slightly to Rs 47,070 crore in 2018-19 from Rs 47,480 crore a year earlier, primarily because of SIFL’s lower numbers. “We could have done better but IL&FS incident happened. It has not impacted from liquidity or business angle but growth has been impacted because of loss of confidence,” said Kanoria.

He said there was a need for serious relook at the NBFC guidelines. “A distinction needs to be made between mistakes and fraudulent decisions since any action has a ripple effect in the sector,” said Kanoria.

Srei had started reducing exposure to infrastructure financing about four years back. Its equipment financing business now constitutes 75 per cent of its portfolio. In the equipment segment, construction and mining, and agriculture equipment has slowed down while agriculture and technology equipment financing is still going strong.

Kanoria said banks were wary of extending loans to non-banking financial companies (NBFCs) so they were relying on external commercial borrowings for fund raising. The group had last year shelved its plan to bring an initial public offer for Srei Equipment following the NBFC crisis. “We are prepared either for IPO or other forms of capital raising but we don’t need capital at this juncture. Once things stabilise only then will we go the market for fund raising,” he said.

Kanoria said infrastructure investment was expected to pick up after general elections but sentiment is weak even in the road sector which was earlier doing fine.

According to Kanoria, starting of insolvency proceedings leads to value erosion of stressed assets. “IBC (Insolvency and Bankruptcy Code) is like a funeral march. It is better if mediation can be done earlier,” he said.

For the infrastructure sector, he said there should be clarity in regulations. Besides, there should be a dispute resolution mechanism since it is difficult to pre-empt everything.

On his company turning into a bank, he said it would depend on what kind of policy does the Reserve Bank of India brings. This could either be universal banking licence or allowing certain NBFCs to turn into banks.

Srei Infra moves regulators for buyback of NCDs from retail investors

Srei Infrastructure has requested Securities and Exchange Board of India (Sebi) and Reserve Bank of India (RBI) to allow buy back of its non-convertible debentures from retail investors.

In a letter to both RBI and Sebi, Srei has said that, “At Srei we would be happy to on tap buy back our NCDs from retail investors as it would prevent interested parties from gaming the system at the expense of investors; offer investors a simple exit route, which would make NCDs more popular among retail investors,” said the letter written by Hemant Kanoria, chairman, Srei Infrastructure to both RBI and Sebi.

According to sources, “the company was apprehensive that a section of market operators have been trying to approach retail investors to sell their existing NCDs at a deep discount, which has prompted Srei to write to the market regulators.”

Recently, Brickwork Ratings had downgraded the Srei’s NCDs, perpetual debt instrument and commercial paper programme aggregating to Rs 5,327.07 crore.

The market regulator doesn’t generally discriminate between different sets of investors during a buyback.

Notably, since 2012, Srei Infrastructure has raised close to Rs 2,148 crore in Srei Infrastructure Finance and Rs 2,167 crore Srei Equipment Finance.

Srei’s last NCD was in the months of April and May, when it raised about Rs 106 crore, with coupon rates of 10-11 per cent.

Srei also shelved its most recent NCD, which was supposed to be open between August 19 and September 18, with interest rates up to 10.65 per cent. The company had said the overall NCD programme as covered by the shelf prospectus was to raise an amount up to Rs 1,700 crore. In this tranche however, the company was seeking to raise Rs 100 crore from the issue with the option to retain another Rs 400 crore in case of over-subscription.

According to Brickwork SIFL was downgraded considering the decreasing asset base, weak asset quality due to weak credit profile of the portfolio, significant decrease in profitability in Q1FY20 due to increasing interest cost and higher provisions, declining capital adequacy ratio, continued high gearing against an expectation of significant reduction in gearing through capital infusion and liquidity stress faced by NBFC sector affecting the borrowing capacity of the company.

However, the rating continues to derive comfort from the experience of the promoter group in the line of infrastructure financing and equipment financing businesses, established market position and brand name and adequate liquidity profile.