The 'AD'- venture capitalist
We had assumed that since Hemant Kanoria, the boss of Srei Infrastructure Finance, had a well-known predilection for Bengali sweets, he would prove an indulgent lunch guest. But his choice of a light a la carte meal was the result of the culinary excesses of the wedding season in Kolkata, write Arijit Barman and Ishita Ayan Dutt.
“I have been attending weddings for the last fortnight and thanks to my sweet tooth, I have gained two kilos in as many weeks. So it’s just a kathi roll and diet coke for me,” he says.
Coming from a 49-year old, who wakes up every day at 5:30 a m, does yoga for an hour, then heads to the Racquet Club for a gruelling game of squash, that’s enough to give anyone a huge inferiority complex. But only one of us succumbs and orders pesto spaghetti and diet coke; for the other, there seems to be little point wasting the cold cuts, salmon pate and lamb chops on offer at the continental buffet in Eden Pavilion, ITC Sonar’s coffee shop.
All the weddings may have put Kanoria on a diet, but when it comes to Srei his plate is full. What started off 21 years ago after Kanoria opted out of running two of his family’s flour mills as a financing company for the construction sector and later into equipment financing is today not just a leading non banking finance company (NBFC), but also an infrastructure provider on the ground. And if the buzz is to be believed, then despite a chequered past with regulators over insider trading allegations and questionable forex dealings, Srei may well qualify to bag a new bank licence from the Reserve Bank of India on the back of its existing e-governance rural IT initiative, Sahej. It already has 28,000 centres and growing. Srei, they say, is one of the hot favourites among NBFCs from the east to build on the government’s financial inclusion agenda.
Srei’s business currently has three distinct verticals. The fund-based equipment and project financing business remains at the core but growing the fee-based businesses of project advisory, investment banking, insurance broking is a big focus area in a competitive market. Finally, Srei has equity investments across the infrastructure space in a portfolio of roads, telecom towers, power, SEZs, IT parks and urban transportation projects. All its partners – from IFC Washington to BNP Paribas to the Tatas – bet on the risk-taking appetite of the three Kanoria brothers who run Srei. Hemant, being the eldest, is the chairman and managing director.
“We don’t build the roads or ports ourselves but we put money in them as venture capitalists. We partner with construction companies who are the developers but we stay on as active but not activist investors ourselves,” Kanoria jokes.
A venture capitalist in Kolkata may seem an oxymoron, but Kanoria defends his home city, which is mine too. “Costs are much lower here and where else will you get such a quality of life?” Touché.
He arguably is one of the best marketers of the city, getting professionals from all over to work for him in Kolkata. His Joint MD is a Bangladeshi who used to work in the World Bank in US. Technology has bridged geographical distances but Kanoria has another very unique explanation to offer. “Kolkata has the highest number of qualified chartered accountants. And in our business we need them aplenty,” he quips.
Add to that his cravings for mithai. Where in the world will you get mishti doi, notun gurer sandesh (made from freshly collected palm jaggery) but in north Kolkata?
Kolkata is home. That’s where the entire Kanoria joint family stays together and will continue to do so even when they move into their new headquarters-cum-residence. Their new house – in the tony Alipore area – perhaps reflects the changing political tide in the state: It used to house the former Russian Consulate in the city. Kolkata is where Kanoria still finds himself chatting with his old college buddies in a roadside dhaba, having tea after their Sunday morning male bonding at the squash club — even now, irrespective of professional success and fame. Kolkata is where Kanoria can also pursue his other passions of art, culture and even books.
But it’s election time, so we have to get his prediction. Kanoria does not want to get dragged into politics but hopes that “whoever is in power will have a strategy in place”. For example, land acquisition. “We know from our SEZ experience in Bengal that the private sector cannot do that. I was confident three years ago. Now I know how wrong I was. It doesn’t matter what the rehabilitation package is. There has to be government support.”
The spaghetti and the roll take inordinately long to arrive — a problem that buffet service avoids. The salmon pate is exquisite, the apples in the Waldorf salad just rightly crunchy and a slice of Parma ham along with it makes it sheer bliss.
Two sectors, telecom and power, capture a lot of top management mindspace in Srei. But here too, the objective has always been to try something new.
Srei-managed telecom towers company Viom is planning to tap the public markets for funds to grow and provide an exit route to some of the existing financial sponsors of the company. But in a choppy market, timing holds the key. Having the Tatas on board as the majority equity partner (the group has a 54 per cent stake but Srei manages the company) always helps soothe frayed investor nerves.
“Viom in its fifth year is the largest independent tower company in India today. With the Tata Teleservices merger, the organisation got a lot bigger and you have a secure tenant in place,” explains Kanoria. And with telcos paying top dollar for 3G spectrum, the conclusion is quite simple: Going forward, telecom players will focus more on services and brands and they will increasingly become asset-light, divesting tower and other infrastructure assets to specialist tower companies. It’s no rocket science but a tried and tested global trend.
Power is where it gets more challenging. Srei had recently acquired one of the oldest utility companies in India – Dishergarh Power Supply Corporation (DPSC) – that supplies power to south Bengal. And it has taken a year to turn the company around. Kanoria has plans to step up generation capacity to 6750 Mw but his focus is now on distribution. “That is where the future will be. But not via a franchisee model,” he points out, adding, “Yes, there will be issues with the regulators. But somebody has to bell the cat. No state has implemented the open access regime properly. Transmission and distribution (T&D) losses have to come down.”
Taking risks is nothing new for the Kanoria brothers. In the late eighties, they cut their teeth backing construction companies. Venturing into telecom towers was also perceived as a hare-brained idea by many. But contrarian thinking is what has built Srei.“For us, it’s not just a venture. It’s more adventure,” Kanoria points out.
Looking back, they invested in the promoters of construction companies, banked on their completion skills rather than fall for order books or balance sheets. Srei bankrolled GMR’s first power plant. And all that has ensured every single construction company worth its salt is its client.
Over our post lunch coffee and Darjeeling orange pekoe, Kanoria is candid about one thing. “There is a serious governance deficit. The government needs to set up an agency to co-ordinate all inter-ministerial issues. We come up with great concepts but we don’t think it through. It’s plaguing the entire infrastructure sector.”
Many argue that’s a problem with Srei as well. Too many projects, but often after a high-profile launch, it either fizzles out or is dropped. Often, that affects morale of a heartbroken project team. “What’s the point of having an Abhimanyu syndrome,” asks Kanoria. “You need to know when to enter and when exactly to exit from a project. Commercial viability is equally important.”
How critical is a new banking licence? That’s our last query. “We won’t die if we don’t get it. Our focus continues to be rural and that’s how it will be. It will be handy and so we are keen. Not desperate.”
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