More projects, faster enviro¡nm¡ent and forest clearances, support in land acquisition and a general clarity in policy are the key. Any infrastructure project takes time and stability of policy is a must to ensure that investment flows, says DK Vyas, CEO, Srei BNP Paribas. Excerpts from the interview.
To what extent has the continuing financial crisis and economic slowdown affected the volume of finance?
There is a de-growth in equipment sales across almost all product categories, which is typical in an economic slowdown. The financial condition of the majority of large customers in the infrastructure sector is also not very healthy. They have high debt levels and lack new projects. The pace of execution of earlier projects is also slow due to multitude of reasons. These two factors along with high interest rates, rupee depreciation and a weak financial environment have affected new business volumes. This has resulted in a drop in the volumes of finance. Though the situation has not reached crisis point, we anticipate this trend continuing for few more months.
How do you navigate turbulent times?
We at SREI believe in consistency, partnership and relationship as being the cornerstones of our business philosophy. We believe in supporting our customers and partners both in good and bad times. Our expertise and experience of over two decades helps us to provide a winning solution to our customers. We have positioned ourselves as a true infrastructure partner rather than a lender. Apart from normal equipment finance, we provide redeployment of surplus equipment, partnering in project financing and advisory, financing of used equipment etc. which helps our customers manage the challenges. We are sure that it is only a matter of time before things start looking up. The long term growth story is positive and at SREI BNP we are well placed to contribute to it.
Has the current slowdown led companies like Srei to diversify into other market segments?
Diversification has not been necessary due to the depressed construction equipment market alone. This is a conscious business strategy to expand in the farm sector since India is one the largest tractor markets globally and mechanisation will be the key to increase farm productivity further. Since our association with BNP Paribas, we have been gaining experience in financing other classes of equipment from technology to healthcare to farm equipment. We see high potential in these sectors.
What is the outlook for mining equipment and other categories?
The outlook for mining equipment looks positive but in other categories we will see a de-growth of over 15 per cent this year. IF the PMGSY programme starts as announced in the budget this year, we may see some increase in the road equipment. Considering that some states will go into election mode by November, we may not see overall growth in any segment. However, we hope that urban infrastructure; PMGSY, dedicated freight corridor etc could be growth drivers for medium size equipment.
What is the scenario of financing in the FTU segment?
First time users (FTUs) and buyers (FTBs) and small customers continue to buy smaller equipment for PMGSY, PWD & state level projects. The volume that is visible is because of this. The larger customers are reliant on these smaller customers to provide equipment and services and so the demand is growing. Due to the poor outlook in this sector, some financiers have slowed down the disbursements to FTUs and FTBs. However, we have confidence in this industry and sector and we continue to repose faith in our customers.
What are the prospects for the financing of used equipment?
There is a higher availability of used equipment now due to lower deployment avenues. Also due to this slowdown, there is less pressure on productivity at the worksite. Thus, we see higher demand for financing used equipment now. Due to a cash flow problem some customers are also selling equipment to reduce their debt, which is proving a good opportunity for the financing of used equipment.
What could revive the future of the CE financing segment?
More projects, faster environment and forest clearances, support in land acquisition and a general clarity in policy are the key. Any infrastructure project takes time and stability of policy is a must to ensure that investment flows.