We hope investors will continue to support us: Hemant Kanoria of Srei Infra

In a Q&A, the company's chairman says the firm had to freeze interest payment and redemption of NCDs due to the pandemic and related regulatory approach

Srei Infrastructure has been in the spotlight for various reasons, the most recent being its decision to freeze interest payment and redemption of non-convertible debentures. Hemant Kanoria, Chairman, Srei Infrastructure Finance says the company had to take this decision for the first time in 30 years due to the pandemic and related regulatory approach. In this interview with Abhijit Lele and Ishita Ayan Dutt, Kanoria also says there are potential investors who can be tapped as soon as the company is able to realign its repayments with customers' cash flows. Excerpts:

Do you see a recovery in business on the back of the rural, semi-urban and sectors like roads? What is the outlook for business?

There is definitely recovery in the economy in the last eight-nine months but at present it has remained primarily in a few essential sectors. Our borrowers from the infrastructure, construction and mining sectors are still struggling and the recovery in these segments will take more time. The government and the RBI have taken a number of steps to revive the economy. All eyes are now on the Union Budget which is expected to provide the much-needed push to the infrastructure sector.

 

Srei had set a timeline for exiting its infrastructure financing business, but with the government looking at big public investment, would you revisit your exit plan?

Historically, in addition to the core business of equipment financing, Srei has been financing projects and offering structured loans, directly and through SPVs, which have supported the infrastructure development in India. Our model has been to finance against assets / projects/ securities, which are monitored on a continuous basis. The NBFC model has allowed us that flexibility. However, over the last few years, since NBFCs were directed to follow guidelines on provisioning and other norms just like banks, we have been reducing our loan book gradually. What is most important for us is the recoverability of the loan in the event that our obligor faces any business challenges or if the projects get delayed due to externalities. Given the present regulations and overall economic macros, the focus now is only on equipment financing.

Where does the resource position stand currently? What is the total outstanding? You have sought restructuring of debt obligations from lenders. Outside of that what steps is the company taking to improve the situation?

The company has enough securities and realisable value of loan portfolios/assets, which would take care of all payments. Our consolidated assets under management was at Rs 43,000 crore at the end of September 30, 2020.

We are presently concentrating on the co-lending model for equipment financing business by partnering a number of banks. In keeping with the times, we have also adapted to the digital era by becoming the first company to take our core business of equipment financing online and partnering with a digital platform. The idea is to leverage the opportunities and efficiencies that technology can bring to our sector.

 

While NCLT has granted relief with the moratorium order, the decision to freeze interest payment and redemption of NCDs appears to have hurt your reputation. Would you look at relaxing the six-moratorium, to regain depositors' trust? What is the total outstanding?

Due to the Covid-19 pandemic and related regulatory approach, for the first time in our history of more than 30 years, we are compelled to defer the payments to creditors including bondholders. We have proposed to reschedule all debt payments through proposed schemes of arrangement, post which all the dues will be addressed. We are putting our best efforts and we hope that our investors will value their long-term confidence in our group and continue to support us.

Our consolidated borrowings at the end of September 30, 2020 was at Rs 30,000 crore against which we have sufficient assets and securities.

As in the case with most lenders, many of your borrowers approached for debt recast under Covid-19 regulatory package. That window closed on December 31, 2020, how many have sought and what is the amount involved (for SIFL and SEFL)?

The outbreak of Covid-19 created an unprecedented situation which no one could have anticipated. More than half of our borrowers have requested for one-time restructuring of their loans. Our priority, at present, is to accelerate collections and monetise various arbitration awards. Despite the challenges, we expect that given the underlying assets against our loans, we will be in a position to recover our loans over a period of time.

 

The need for fresh capital injection seems imminent for most financial sector players, what are the plans for both entities to bring in fresh equit? Any timeline?

For NBFCs, money is the raw material. We are continuously exploring opportunities to strengthen our capital base and remain confident of raising resources. Given our track record and strong franchise, there are potential investors who can be tapped as soon as we are able to realign our repayments with our customers' cash flows.

RBI has started a special audit. What is the reason for the audit and is the process through? Has RBI put any curbs on taking new business?

The regulator, in its authority, can at any time conduct inspections / audits / special audits of entities under its supervision. The company has been gradually reducing its loan portfolio by exiting structured finance/infrastructure project finance books and is also going in for co-lending partnerships with banks. We will continue to finance in segments like construction and mining equipment, healthcare equipment, IT equipment and agricultural equipment since we have created a strong franchise and acquired deep expertise over the last 31 years. We do not propose to enter any new business lines at this juncture.