Srei Group today said it has inked an MoU with New Zealand's CBL to form a first of its kind joint venture (JV) offering surety and guarantee bonds in India.
The MoU was signed at New Zealand High Commission here last night in presence of New Zealand's High Commissioner to India Joanna Kempkers and NITI Aayog CEO Amitabh Kant.
"Srei Group, part of the Kanoria Foundation, and New Zealand's CBL Corporation Limited (CBL) have entered into an MoU with the intent to form a first of its kind 50:50 joint venture company offering surety and guarantee bonds in India," Srei Group said in a statement.
The JV will offer performance guarantees and sureties through bonds to its customers in India for participating in projects in infrastructure and allied sectors.
Terming the offering unique, Kant said this will reduce working capital needs of the players allowing them to develop and grow their businesses.
The statement said despite huge growth appetite in India, mostly in infrastructure sector, the contractors in most cases are faced with the challenge of working capital issues because of the traditional models of financing that continue to dominate the sector.
Bringing in credit products such as sureties and guarantees which are widely used in other developed nations can help in bringing about a change, which is the need of the hour, it said adding, these products can also prove to be a solid alternative to bank guarantees.
Sunil Kanoria, Vice Chairman, Srei Infrastructure Finance Ltd said, in developed nations like the US, Canada, Germany, a Bid Bond or Surety or Performance Guarantee is a part of pre-qualification criteria for bidders, especially for government-sponsored infrastructure projects.
"In India, the market for such instruments has not yet developed. As of now, only banks provide such instruments in India and there is an urgent requirement to develop such products and offerings here," he said.
Peter Harris, MD, CBL said the decision to form the JV has been a joint effort by Srei Group and CBL management over the last 12 months.
Alistair Hutchison, Deputy Chairman, CBL added: "The JV would add to India's growth aspirations by giving India's businesses greater options in the Guarantee and Bonding sector."
Vikash Khandelwal, CEO of the proposed JV said CBL's strong track record and experience in bonds, sureties and guarantees, and Srei Group's expertise and knowledge of the local market will create value for businesses across India.
The government's focus on the infrastructure space has improved business confidence and many new infrastructure projects are in the pipeline, he added.