Asset finance company Srei Infrastructure Finance has seen a steep decline in lending growth. The company’s Vice-chairman and Managing Director Hemant Kanoria attributes it to the lack of availability of funds. He tells Niladri Bhattacharya in an interview the situation may not be a lot different next year. Excerpts:
Has the business environment improved?
The situation has eased considerably compared to September-October, when there was a lot of uncertainty. Over the last six months, liquidity has improved, inflation has come down, which were the two major concerns.
But with banks’ liquidity position improving significantly, now the issue is whether it is percolating down. Today, in the financial sector, particularly for the infrastructure financing companies, long-term is a real challenge. We do not want to get into a sort of liquidity crisis ourselves.
We want to ensure that long-term funds are available so that we can continue lending, which is typically for 5-10 years. After a long time, our growth rate has slowed down, particularly because of the last two quarters. In the first two quarters, we did a business of about Rs 4,500-5,000 crore.
But in the third quarter, it came down to Rs 300 crore. And in the current quarter, we hope to do another Rs 1,000 crore of business. The year-on-year growth will be 5-10 per cent as against a growth of 35-40 per cent during the last few years.
So, were the projects assisted by you also affected?
There were many projects which were planned but could not achieve financial closure due to the liquidity crisis, particularly projects in the power, SEZ and roads sectors. The main reason was that they were not able to raise equity as the markets dried up. At the government level also, especially for road projects, there are so many bottlenecks, which had their impact.
Will things improve next year?
Overall it will be a challenging year and we should be in a position to maintain a similar growth of 5-10 per cent. We will also be able to maintain the same amount of disbursement.
What about the cost of funds now?
It has been coming down in the last couple of months. At present, it is hovering around 11-13 per cent for us and there are indications that it will come down further.
You have increased your lending rates twice in the last six months. But with the cost of funds coming down, do you plan to pass on benefits to borrowers?
We did not increase our interest rate to the extent of the increase in the cost of funds. Earlier, our benchmark interest rate was 14.5 per cent, which was raised to 16 per cent. We wanted the market to stabilise before deciding on new rates. So, we are going to review it in April.
You just raised $100 million through the ECB route. So, how much more do you plan to raise?
Everything depends on the government approval. Our requirements are huge, and we can afford to raise around $500 million from overseas. But we need to get the necessary approvals. During 2008-09, we have raised around Rs 3,500-4,000 crore and will raise a similar amount in the next financial year as well, most of which will be from the domestic sources.
You have not tapped the special refinance window. Why?
The problem with that window is that the interest rate is high. Then, it is only for three months, which is too short a period for a company like us and we will run into an asset-liability mismatch on accessing that. It is only for those companies that have severe mismatches.