Srei sees opportunities amid stress in infra sector: Hemant Kanoria

Srei Infrastructure Finance has been at the forefront of innovations in its areas of operations since a time when providing long-term loans to infrastructure projects wasn't considered to be a cool business to be in. But bringing in concepts like mezzanine debt financing or scouting the globe to raise equity from a clutch of multilateral agencies like DEG and KfW of Germany, FMO of The Netherlands and BIO of Belgium, among others, made Srei a name to reckon with. Tying up with the Tatas for its foray into telecom tower space and getting itself recognised as an Infrastructure Finance Company by RBI have put Srei into a different orbit. Yet, the continued slowdown in the infrastructure sector has stifled Srei's growth for long. Is it time to reinvent the company by looking beyond a sector where signs of a long-awaited upturn remain elusive? Its chairman and managing director Hemant Kanoria reveals to Sumit Moitra the way forward.

Infrastructure is a sector where nobody is venturing now, be it promoters or bankers. A lot of projects are turning non-performing assets (NPAs) on a regular basis. How do you see this from the point of view of a lender in this very sector?
We see opportunities. At a time when there is so much stress in the infrastructure sector, there is an immediate need for people with expertise to enter and de-stress the whole sector. We have big presence in sectors like telecom towers or equipment financing but we can have bigger roles in power, water or SEZs. We have hands-on experience of promoting and managing such infrastructure projects yet we don't have any stresses. So, we believe it is the right time to come in.

But why now at a time when Reserve Bank of India has warned of further rise in non performing loans?
Promoters of these stressed projects have realised that they have reached the threshold beyond which they can't continue. They are also willing to accept new promoters coming in. The bankers have also reconciled to the fact that if they don't take a haircut it would be difficult to take these stalled projects forward.

Srei has stakes in several road projects. The viability of roads as business venture is now being questioned with tolling facing resistance from users and also politicians in states like Maharashtra.
There were cases of resistance but users have found out the benefits and now don't mind paying Rs 100 or Rs 200 for the comfort and convenience. About a month back, I was travelling on a toll expressway from Bhopal to Indore and then to Ujjain, a stretch being managed by Srei. In one day, I traveled more than 400 km and felt no fatigue. What's more, I was pleasantly surprised by the roadside amenities, particularly the dhabas managed by the state government. Every stuff was available at cheap cost in a clean hygienic environment. And the management was so efficient; paying cash, collecting token and eating was over in 15 minutes flat. Like Madhya Pradesh, there are many other states doing a great job of providing roadside amenities.

So, you are hopeful that the government can play a role in giving big boost to the infrastructure sector?
Absolutely. Take the coal sector. India has a huge reserve. So we need to have a price for power which is reasonable. It is important for the Make-in-India campaign to succeed as we need competitive input costs in which power plays a major role. Government has a role to ensure this.

Another struggling area where you have recently ventured into is white label ATMs. There are reports of government considering allowing 100% foreign direct investment under automatic route to promote financial inclusion and a draft Cabinet note has already been circulated. How do you see this development?
FDI per se is good for every sector. But for white label ATMs, this is not going to make any transformational difference. Because as it is the infrastructure would be built by Indian companies only and technology is widely available. Also, these ATMs are good for cash dispensation only. But as people are shifting to using cards and mobile fund transfers, all these disruptive technologies are changing the whole banking system. In such a scenario, whether a white label ATM would have any utility or not is a big question mark.

Talking of technology, Srei forayed into setting up common service centres (CSCs), a concept mooted by the government as a means to deliver e-governance. But e-governance never took off except in some handful of states. Is there a need to reinvent Sahaj E-village as well?
We have created this huge infrastructure of 28,000 centers across states. But unfortunately the vagaries of working with the government has manifested in this business. While e-governance hasn't taken off, there has been frequent changes in government policy towards these CSCs. The real achievement of Sahaj has been creation of village level entrepreneurs running each of these centres, an asset for the country with immense potential beginning with ability to create jobs for about 50 people in every community they operate in. Think of the multiplier effect of this. But sadly, neither us nor the government has been able to capitalise this.

Maybe the current government's Digital India mission might give it the much needed boost.
A concept like Digital India can sit on this infrastructure. But then, the bureaucracy is keen to junk everything that has been done before and start all over again. Now we are preparing to work on a model where the government won't be there.