Revival In Construction And Mining Activity Pep Up SREI Infrastructure’s Second Quarter
Kolkata based Srei Infrastructure Finance Ltd. posted a jump of 438 percent growth in it's net profit in the second quarter. The net profit for the quarter rose to Rs 61.87 crore as against Rs 11.50 crore recorded during the corresponding quarter last year.
The infrastructure equipment financing company posted a revenue, of Rs 1106.65 crore a jump of 31 percent over last year.
Hemant Kanoria, chairman and managing director of Srei Infrastructure Finance Ltd., said, "The infrastructure equipment industry in India is on the road to recovery. The industry is expected to grow at 25-30% during the current financial year and reach US $10 billion mark by 2020. This quarter's results clearly reflect the improving trend of the sector and the company's performance on a consolidated basis.”
In a telephonic interaction with BloombergQuint, Kanoria said a decline in non performing assets and revival in construction and mining activity was the primary reason for improvement in this quarter.
Edited excerpts from the interview:
What could be the reason for the stellar growth this quarter?
For the past year or so, things have started improving in the infrastructure space especially in the construction/ mining. The sales have improved and therefore our financing has also increased. Because of this increased business, it has resulted in a higher profitability.
Secondly, on the NPL (non-performing loans)side, which is the biggest bane for any financial institution, we have been focusing on that for the past couple of years. We have started seeing results now. The NPL gradual recovery is also happening.
How much of the debt component is written off? How much of the provisions were against NPLs?
The provisions against NPLs were higher in the previous quarters. Last year, the gross NPL was 4.2% and it has now come down to 2.6%. The net NPL from 3.2% has come down to 1.8%. There is a substantial drop in the NPL factor.
How do you see the consolidated book, the equipment finance or even the infrastructure finance growing over the current year?
At present, we are at about Rs 36,000 crore on the total AUM on the equipment financing and project financing side. Going forward, we see that the book will grow but will not grow to the extent. The disbursement is growing at about 30-35% . There are also repayments. We keep on getting repayments against the old loans, which we have given. That is good as it improves the velocity of our portfolio. But the disbursements will rise and on the (order) book, we will see about 5-7% growth in the financial year overall.
After the share swap with BNP Paribas, how has the equipment finance business grown? How do u plan to tap this growth potential?
The equipment finance business is on the right track. This year's first half we have seen a growth of about 35% on the equipment financing business. There isn't a substantial difference in the business because of BNP Paribas coming in as a shareholder of Srei Infra instead of being a 50% shareholder of the equipment finance. As the philosophy of the group is not changed.
You have ventured into digital marketplace for equipment business. What is your outlook for that?
From the equipment financing we have diversified our portfolio into giving equipment on rentals, which we have been doing for 8-10 years through Quippo. We have been doing online sales and auction of old and new equipment. Now we have brought it on a digital platform. Basically , we are being more contemporary so that our customers get benefited.
You spoke about the infrastructure sector improving. What is your outlook on the sector for the next two to three years?
It should (improve). Infrastructure sector is such a wide sector. Some of the areas in the sector such as road has seeing a lot of focus by the government. Many problems have been sorted out. Claims that were stuck up for the long time have been getting cleared by the government. Lot of hurdles in the road sector have been gradually getting removed.
However, in the power sector, we still have to see the revival happening. There are a lot of complications in the power sector. It takes a longer time for it to ironed out. May be 6-9 months' time, we will see the power sector also looking up.
Additionally, irrigation projects in the rural areas have picked up and that has triggered a demand for construction equipment. The activity in the mining side has also picked up. This has given us some better opportunities to finance equipment.
And finally, with the GST now soon becoming a reality, what are your thoughts on that? How will it benefit the infra sector?
The issue with GST that has already been flagged off is that it should not be cumbersome. Otherwise it a very good concept. Construction companies who primarily do work all over the country had problems earlier to move equipment across the country. It is important for them to seamlessly move the equipment. This would be a big advantage.
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