Srei Infra Finance lines up global expansion plans

Srei Infrastructure Finance Ltd, one of the country’s few pure-play private sector infrastructure finance companies, is going global.
The Kolkata-based financing company, which recently received the tag of an infrastructure finance company from the Reserve Bank of India, is planning to set up operations at multiple overseas locations and is actively eyeing geographies like the United Arab Emirates, Africa and several countries in Southeast Asia, its chairman and managing director Hemant Kanoria told DNA.

Srei’s international presence so far has been in the form of a joint venture outfit, Zao Srei Leasing, which has been doing moderate business in Russia.

“We were looking at going international in a much bigger way by venturing into other geographies. We have been thinking about this for quite some time but then the global crisis of 2008 happened and we decide to wait till things stabilised. Now that there is stability, we are reviving our plans. This year we will start exploring and evaluating these places by sending our team,” Kanoria said.

Srei’s overseas experience has not been quite satisfactory with its Russian business performing poorly but things are looking up now.

“It’s now about four years that we are in Russia. It started with a lot of potential in 2007. But during the crisis of 2008 Russia didn’t know how to react so the economy slowed down and there was negative growth, as their economy didn’t have the resilience, which we see here. Now in the last 6-8 months it has started picking up again,” Kanoria said.

Srei’s domestic operations witnessed a robust growth with loans book expanding 60% in 2010-11 to Rs14,400 crore from 2009-10’s level of Rs9,000 crore.

And this means Srei needs to borrow much more in the current financial year to maintain growth even at a modest level.
“Even if we are to maintain a growth of 30% in our loan book this year, we need to raise anything between Rs8,000 crore and Rs10,000 crore of debt,” Kanoria said.

A part of the borrowing would come this year from overseas in the form of external commercial borrowings, a route which has now opened up wider following the status of an infrastructure sector financier.

“We have ambitious plans to raise money from overseas, now that we have the status of the infrastructure finance company. We would be definitely looking at raising anything between $200 million and $300 million through the ECB route in 2011-12 to fuel our growth,” Kanoria said.

While the new status would open up new avenues and lower cost of funds a bit, Srei now wants access to the provisions of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, now available only to banks, to cut down on its lending risks.

“An infrastructure finance company needs two things: ability to raise long-term funds at lower costs from both domestic and overseas sources; and secondly, when they lend money, they can do a recovery which is quick. For this, we have requested the finance ministry that as banks infrastructure finance companies like us should also be allowed to use the SARFAESI Act to recover loans.”

Srei needs a cheaper source of funds as the market for infrastructure bonds in India has remained a non-starter, which Kanoria said, is due to their poor attractiveness from tax saving angle.

“For infrastructure bonds, investment of just Rs20,000 is eligible for tax exemption (under section 80CCF), which comes to a tax savings of a meagre Rs3,000-Rs 4,000. Nobody would bother to find out an infrastructure bond just to save only this much. An investment limit of Rs2 lakh would have created some interest. The government’s idea was to attract mom-n-pop money. But in India money from such sources is not Rs20,000 any more,” Kanoria
said.