Diversified portfolio helped manage risks better:SREI Infra

Continuing with CNBC-TV18’s focus on companies that are based out of Kolkata or have businesses in the city, Ekta Batra and Anuj Singhal spoke to  Hemant Kanoria, CMD of SREI Infra to know more about the business outlook going forward.Kanoria said the company has diversified its portfolio across various sectors to manage risks of slowdown from the construction and mining equipment segments. The company now has diversified into healthcare, agriculture and IT equipment segments.He said the infrastructure sector which has had its set of problems is now slowly coming out of it with government’s requisite support but it will be sometime before things really pick up on the ground. Moreover, there is still a lukewarm  response from overseas investors for investing into the sector. Below is the transcript of Hemant Kanoria’s interview with Ekta Batra and Anuj Singhal on CNBC-TV18. Ekta: Wanted to start by asking you about the construction equipment business. We have seen a lot of your peers face problems in the construction equipment business in terms of gross non-performing loans (NPLs), etc. What is the latest situation on the ground in terms of further disbursements within that space as well as what the asset quality situation is looking like? A: In the construction equipment business because of the experience that we have had for the last 26 years by being in this same business, we have seen quite a lot of ups and downs. So, we have a very stable model on the construction equipment side and the mining equipments. About three, four or five years back, we saw that there would be some slowdown which may happen in the construction and mining equipment segment. So, we have diversified our portfolio into healthcare, agriculture and IT equipments also. Therefore, we have not been exposed to that high a risk. The other advantage which SREI has is because of the large equipment, the construction and mining sector clients that we have, almost about 25,000-30,000 of them, so our risks are diversified, our portfolio is diversified, we are all over the country, we have almost 100 branches. So, we have been able to manage our risks quite well. Nevertheless, we have seen in the last couple of years, increase in the NPL. Earlier we used to be at about 50-55 basis points which has gone up to about 3.5-4 percent only because of the fact that the construction industry has slowed down and we see that last two, three years infrastructure has not been going the way that the government had envisaged or the private sector had also thought about. So, there has been some stress but there is nothing to be very worried about because it is manageable. We are managing it well because we understand this particular business very well. I would not like to comment on the competition and why the competitors came in and why they have exited. It is very difficult and they will be the best people to say why they want to get out of the sector. Anuj: Last week there were some reports that American Tower Company (ATC) could be buying Viom Networks and that you have also agreed to sell your minority stake; if you could update us on that? A: It will difficult to throw any light on that at this particular juncture because as we have mentioned time and again that it is still under discussions and as and when it is finalised we will be in a position to announce that. So, I am sorry that I will not be able to throw much light on it at this juncture. Anuj: Has ATC initiated a conversation with you as well? A: As I said the discussions have been going on with ATC, with the IPO, with all the various things. At an appropriate time we will make the announcement. However, at this juncture it will be very difficult to say anything. Ekta: What is your stance on strategic divestments in the year and can we see other assets besides Viom that you could speak about? A: We have a portfolio on roads and SEZs and other sectors also where we have made investments and we are actually looking at any kind of dilutions or IPOs, etc. However, the infrastructure sector has had its set of problems and it is coming out of it and the government is also giving all the requisite support which is required to this particular sector. However, still it will be some time before we see that things pick up and there would be overseas investors wanting to invest in this particular sector. So, there is still a lukewarm kind of response and as and when it warms-up, we would get into the market. From SREI’s perspective, we do not have any stress as such, neither there is any liquidity problem nor there is any immediate need that we have to disinvest or dilute. So, therefore we would look at an appropriate time and we will optimise the return for the company and for the shareholders.