SREI Infrastructure’s subsidiary SREI Equipment Finance will raise Rs 500 crore thorough non-convertible debentures. Funds raised will not have dramatic difference on the company’s cost of funds, said Hemant Kanoria, CMD of SREI Infra. Speaking to CNCB-TV18, Kanoria said that growth has slowed down due to demonetisation, but not substantially. The growth is expected to revive from the current quarter onwards. Mining and construction are doing well with new contacts coming in. The company is not expecting addition to its default accounts on back of demonetisation, Kanoria added. The management has maintained its loan growth guidance of 25-30 percent for overall business for FY17.Below is the verbatim transcript of Hemant Kanoria's interview to Latha Venkatesh, Sonia Shenoy & Anuj Singhal. Anuj: Raising Rs 500 crore through non-convertible debentures (NCDs) would have looked great two months back, but in the current environment you think it make sense to raise this kind of money at this coupon rate?
A: We had already made an announcement and by the time the interest rates come down, it will take about three-six months though the bankers are looking at reducing the interest rates but by the time it gets implemented and the trickle-down effect takes place in the economy, it's another three-six months down the road and we are continuously in the raise of money because we are in the financing business and this is a very small amount that we are coming out with. Therefore, it is not going to make any dramatic difference in the cost of fund for us and this is more the retail side of raising the money and that is why we have launches this and it is having a good response also because the interest rates are coming down. So we will be able to close the issue very soon and after that whenever we are coming out with it, we will see what the market rates are and accordingly we will reduce the rates also.Latha: If you are raising the money over 9.5 percent then you will be lending it also over 10 percent. Won't the banks be undercutting you?
A: No because the bankers have announced that the interest rates have been reduced but to the borrower the interest rate has not yet reduced.
Latha: It's for home loan, so I would assume down the line it would impact other borrowers as well?
A: Yes. The banks' interest rate has also come down but it is going to take time. In the last couple of years the RBI has been announcing the reduction of interest rates but if you look at it, how many borrowers have been able to get that benefit and to what extent, maybe 0.5-1 percent, which is negligible. Therefore, we have been saying that if Reserve Bank of India (RBI) or the government has to create a kind of an environment where the interest rates are coming down, it has to be done at large amount at one instance. It cannot be in small measures because if it is 25-50 bps, it is not going to cause any kind of reduction in the interest rate to the borrowers and make any positive effect.
There are large number of power companies and infrastructure companies who are doing well and still paying 14-15 percent interest to financial institutions and banks. There is a lot of disconnect which is happening where the interest rates are coming down but actually the borrowers are not getting that benefit.
Sonia: Can you tell us a bit more about disbursement, about loan growth in the equipment financing business. What are you expecting to see over the next three-six months?
A: It was growing well but after demonetisation, which happened from November 8, there has been some reduction in the growth for this particular quarter, but there is not a substantial reduction because people were getting readjusted to the environment and how they would be doing business going forward, everyone was involved in day-to-day activity than to look at any kind of growth.
However, this quarter onwards we see the growth coming in because the construction and mining sector is doing well, there are a lot of road contracts, irrigation contracts which have been awarded by the government. So everyone would be dependent more on engineering, procurement and construction (EPC) contracts, which are coming from the government.
Latha: Bad loans - because of demonetisation period, are you likely to end up with more defaults for Q3 and Q4?
A: Fortunately nothing has happened and the defaults have not increased because as it is our clients were paying by way of cheque. There was not much of cash collection in their business also because they are all construction, mining, headgear equipments that we have been financing. So we have not seen much of an effect on any kind of defaults happening.
Sonia: What kind of realistic growth you would be looking at in the second half in terms of disbursements. I think you are sitting on a base of around Rs 5,500 crore as of last quarter but what could the growth be?
A: We have already given an indication, a guidance that there will be growth in business by about 25-30 percent, so we maintain that and I am sure that in the last quarter there will be good growth because the construction contracts have not reduced, the mining contracts have also increased.
Latha: You are going to sell or list your build, operate and transfer (BOT) assets. Any progress on that, sell or list?
A: In road sector we have a strategy; basically we have been looking at private equity fund or strategic investor to come in and also the public market. So we are still evaluating these three but in the last two months because of demonetisation people are getting adjusted, the whole economy is getting adjusted as to how to work on digital platform.
However, in November the toll collections was stopped by the government therefore, there we thought that it is not an appropriate time to launch the issue, but we will do it.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
