Financing the Future
Excon 2017 just wrapped up. How was the event for SREI Equipment Finance?
Our focus this year had been to provide customised financing solutions, covering the entire asset lifecycle, to our customers. This year, we had participated on a much larger scale than before, and had taken an outdoor pavilion of about 17,000 sq-ft. Visitors could experience technological innovation in equipment financing; audio-visual treats; with fun and engaging activities; interactive information systems including information kiosks, multi-touch screens, and interactive walls at our stall.
Considering that large infrastructure projects are currently being awarded, what is the kind of growth you envisage for your business in the near future?
The government is focused on initiating policies to ensure the creation of a world-class infrastructure in India. This has caused a surge in demand for road construction equipment, thereby increasing the disbursement to the segment. Government focus on building concrete roads (on national and state highways) has boosted the demand for concrete and material processing equipment, though the slowdown in the real estate sector continues. As the segment requires large capital expenditure, financing accounts for approximately 80-85% of the total equipment purchased. The total Construction, Mining, and allied Equipment (CME) finance disbursement for Fiscal 2017 was estimated to be approximately Rs 280 billion. The construction equipment finance industry is expected to grow at a CAGR of 19% for the next three years. The overall construction equipment industry is expected to reach 1,25,000 units by 2020, and the new equipment finance market will continue to have a share between 87-90% for the next three years.
SREI Equipment Finance recently filed a draft red herring prospectus (DRHP) in a bid to launch its own IPO. Tell us about your objectives in this regard.
The objectives of the issue are as below:
i. Augmenting our capital base: We are an NBFC-ND-SI in India and are registered with the RBI. As per the capital adequacy norms issued by the RBI, we are required to maintain a minimum capital adequacy ratio, consisting of tier-I capital and tier-II capital, which shall not be less than 15% of our aggregate risk weighted assets on-balance sheet and of risk adjusted value of off-balance sheet items. We intend to utilise the net proceeds from the fresh issue to augment our capital base to meet our future capital requirements.
ii. General corporate purposes: We propose to deploy the balance net proceeds of the fresh issue aggregating towards general corporate purposes, subject to such utilisation not exceeding 25% of the net proceeds, in compliance with the SEBI ICDR Regulations, including but not limited to meeting expenses incurred in ordinary course of business and any other purpose as may be approved by our board or a duly constituted committee thereof, from time to time, subject to compliance with the applicable provisions of the Companies Act.
iii. Brand creation: In addition, we believe that the listing of our equity shares will enhance our visibility and brand name among existing and potential customers.
What can one expect from SREI Equipment Finance in terms of its plans and business strategy for 2018?
We have experienced steady growth recently. Our growth strategy primarily includes consolidating our equipment financing business through strategic business alliances and marketing initiatives, continuing to expand and diversify our product portfolio, growing our operations and network across India, and expanding our customer base across various business verticals in India. Some of our business strategies are as below:
• In addition to providing CME financing, we intend to continue to expand our operations in other business verticals, in particular: used CME equipment, tippers, IT and allied equipment, farm equipment, medical and allied equipment, etc.
• Enter into partnerships with new OEMs and vendors and expand in equipment categories and business verticals with attractive growth opportunities.
• Endeavour to optimise borrowings and explore alternate avenues of funding.
• Adopt newer technologies to achieve greater operational efficiency and advanced risk management processes.
• Continue to build capability through skill development and training.