There will always be competition regarding rates and credit. Then again, how effectively you will be clear and open to the customer in understanding his needs and matching it with your schemes are key components, says Ranjit Manjarekar, COO - Infrastructure Finance, Tata Capital. Excerpts of the interview.
Could you tell us about Tata Capital and its core competencies?
We have almost Rs 6,000 crore in infrastructure space in our order book, and 50 per cent of that comes from equipment finance. We also have project finance which is comparatively a small business where we deal with the customers` various requirements like project requirement, terms of requirement, and working capital requirement. Another area is the renting, operating and lease business. The fourth activity is syndication. There are many big contractors who come to us in search of funding. We have good relations with all financial institutions. So, we source some money for our customers.
Please elaborate on your product portfolio and geographical spread.
As mentioned, we operate across India, through almost 115 branches, and we have a large team of about 450 professionals. We work with our customers with all the products except writing a cheque. We have a whole gamut of tailor-made products, which are designed according to customer requirements.
Basically, in this business, there are four kinds of customers. The first-time user and first-time buyers, is a section growing by almost 30 per cent every year. When the boom started in 2007, a lot of new entrepreneurs wanted to get into business; that has substantially reduced now. The subcontract segment comes with players who have around five to ten machines. Then there are categories of clients with a balance sheet size of around Rs 50 crore, Rs 100 crore and Rs 5,000 crore. As the customer grows, we structure our products accordingly.
Do you finance used machines too?
Yes. In fact, currently, there are a lot of used machines available in the market. So this is a big market, one that is growing considerably. In our order book, 25-30 per cent is the used machinery segment. However, this is not an organised market in India.
We request all the manufacturers to ensure that they have a good buy-back policy for buying their old equipment so that one can have an organised scene. Once a used machine is taken back by an OEM it is refurbished and given back to the customer with a proper warranty or guarantee. If those procedures get established properly, it will be a booming market even for the current manufacturers.
How do you assess the present status of CE financing?
There are multiple issues at stake. Today the financial strength of all infrastructure companies is being tested severely. Basically, they are struck at various stages. There are considerable project delays and a lot of capital issues like interest hike, ECB issues, depreciation of rupee, etc, have affected the industry. For executing important projects, some components of the equipment needs to be imported but the volatile dollar-rupee fluctuation has affected imports. Secondly, if we analyse the project cost at 8 per cent, today the cost has gone up to 12.5 per cent.
So there is definitely a reduction in the project receivables. There are multiple problems right now but the government is trying to work very closely with us on the whole infrastructure projects scenario.
Given the current scenario, what is your strategy to sustain growth?
Basically, in such a situation, we need to work very closely with the customer and retain good customers, too. At this point of time, we are not looking at growth and increasing our order book. One has to work with customers, acquire and retain the good ones. So, we are watching the situation and increasing our business. We are not very optimistic about increasing volumes right now.
How healthy is the competition in this segment and what sets Tata Capital apart?
We are the old players in this business. Back in 1990, there was nobody to fund machines and there was no organised market. Machine funding ran the risk of defaulting customers, and funding defaulters. But, after 2000, everything changed. So, now, practically every NBFC, all nationalised banks, even private banks are in the business. Of course, in this field there will always be competition over rates and good credit. Then again, how effectively you will be clear and open to the customer in understanding his needs and matching it with your schemes are key components.
How effectively, quickly and promptly you give a service matters in this business. You need to have a good, enthusiastic team to work with the customer continuously.
What is the procedure on recovery of assets from a defaulter?
Being an NBFC, we have a regulatory prime fund given us by the RBI and by various credible authorities. So, we meet all the regulatory framework regulations. There is a notice that goes to all customers right from the first default to the last default. Then there are various processes, we file action against Section 138, then Section 9, and Section 17. We can even file a criminal complaint, if we perceive criminal intent. We work according to the norms. We have an entirely different team to handle this.
How do you look at leasing as an option?
Leasing is not an organised sector in India. Unfortunately, the rental and leasing markets are just 2 to 5 per cent, with more unorganised players in them than organised ones. Of the total machines you sell, 50 per cent actually goes into rental and 50 per cent into captive goods. This segment will get organised but it will take time.
How do you view the growth potential three years down the line?
We are positive on infrastructure space internally, and we can definitely see some good numbers, a change for the better if single-window clearances start to happen for all projects in India. Once everybody starts working, with clear focus and quick decision-making that will actually change the face of this country.
Will the forthcoming elections have any impact on growth prospects?
I personally feel that there may not be an impact. There may be many restrictions, the projects may be delayed little bit but work will go on, irrespective of who comes to power.
Daimler India wins Apollo-CV Award
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