See healthy pickup in equipment financing: SREI Infra

Sumaira: I want to begin with your disbursement; you have seen a 40 percent rise on a sequential basis. Where this growth has come from?

A: We were giving the guidance since the beginning of this financial year that there would be a growth in disbursement because of the construction sector; construction and mining equipment. The road sector has really picked up and there are a lot of contracts which have been awarded in the road sector, irrigation projects in the various states and also on the mining side, so it's because of all these. Our main focus for couple of decades has been in this particular sector, so this growth has been very good for us.

However, we have also been financing healthcare, we have been financing technology sector and we have been financing the rural equipment side also. On the rural equipment it has been slow, it has been slower than our expectation, but in all the other three-four sectors there has been very good growth and in spite of the demonetisation also there was a slight blip in it but otherwise it has been more or less fine. Therefore, if you look at it our profit after tax (PAT) growth in the last nine months has been almost about Rs 245 crore to Rs 180 crore from Rs 51 crore and beside the disbursement growth which has been of 41 percent, the total income has also grown by 43 percent, if we compare that for quarter-to-quarter. For PAT also, there has been a good growth. So overall there has been a good growth in all these particular areas.

Going forward also, we see that this growth will be maintained because over a period of time in the infrastructure space there were certain mistakes, three-four years back we had made so the non-performing assets (NPAs) had also gone up. Gradually, the NPAs have come down and now net NPA is about 1.8 percent. So, successively every quarter it has been going down. The fresh business in the last two to three years disbursements that we have been doing', the loans there is hardly any NPAs in that because we have been much stricter on the credit quality because of the learning which are there.

So, going forward we have a robust business model both on the project finance side and on the equipment financing side. We have teams which are having the expertise and the skill set and fortunately this year also, as we have seen in the Budget, the government announced that there has been a large outlay in the infrastructure sector. So, from Rs 2.2 lakh crore of investments this year, the government is planning to make an investment of expenditure of about Rs 3.9 lakh crore, so that is almost an increase of Rs 170,000 crore, so therefore there was a substantial increase and we are quite sure that we will get the benefit of it.

Abhishek: I understand that your disbursement growth has been 38 percent on a quarter-on-quarter basis to Rs 4,812 crore. However, it is disheartening to see that asset under management (AUM) growth is not matching up that disbursement growth. Is it due to higher re-payments that you are seeing lower AUM growth than what actually could have been a potential much better AUM growth?

A: The AUM growth is not the target of any of the companies. The growth in profitability is one of the targets, the growth in disbursements when people re-pay the money on time so it is good signs. So, basically in the last couple of years we have seen the repayments have been on track. If the AUM is not growing it is also showing that the repayments are coming on time but the profitability is growing, the disbursements are growing, so fresh loans are growing and people have been paying on time because they have been getting their money back which is very good for any financial intuition.

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