Shriram Equipment Finance Company (SEFC) is planning to raise about Rs 150-200 crore from private equity (PE) investors and rope in strategic investors.
SEFC is a subsidiary of Shriram Transport Finance Corporation, which has an asset base of about Rs 56,000 crore. Umesh Revankar, managing director of Shriram Transport Finance, said the company expected to grow at a compounded annual rate of 15 per cent. "We may require Rs 150-200 crore," he said, adding he would soon propose this to the company's board.
He said some funds had already approached the company, but declined to share the names of these funds.
Demand for equipment finance had picked up in the last two months, Revankar said, adding during this period, SEFC's assets under management increased 20 per cent, exceeding Rs 3,200 crore. "We have been looking to raise money from PEs and rope in strategic investors, but we delayed it due to market conditions in the construction industry. But as things are looking good, we would look at roping in investors," he said.
An investment banker said finding investors wouldn't be difficult for the five-year-old company. A total of 23 PE investors have invested about $750 million in various Shriram Group companies; the group has the highest PE participation in India. Major investors include Citi Group, ICICI Bank, Axis Bank, Frontline Strategy Group, Reliance Capital, Chrys Capitol, Blue Ridge Ltd. Tiger Global Management, JM Finance, Merrill Lynch, Cambridge, Bessemer Venture Partners, ICICI Venture, Asia Bridge, TPG Texas pacific Group and Walton Street.
The fact that the construction sector is expected to see a turnaround may also draw investors to SEFC. An investment banker said as the sentiment in the sector revived, demand for construction equipment finance would also increase.
By 2020, the construction equipment sector's revenue is estimated to touch $22.7 billion, against $5.1 billion in 2011-12. Unit sales of construction equipment are expected to increase to 82,000 by 2016 from 61,745 in 2011-12, according to India Brand Equity Foundation report.
The banker quoted earlier said during the second quarter, SEFC's return on assets was 3.87 per cent, compared with 2.28 per cent a year ago; return on equity stood at 25.89 per cent, against 21.13 per cent a year ago. During the quarter ended September, the company's assets under management stood at Rs 3,211.2 crore, against Rs 2,380 crore in the year-ago period.
SEFC provides finance to contractors, sub-contractors, mine owners and operators, plant hirers and others involved in infrastructure development, including road contractors and irrigation contractors. Key companies in this segment include BajajFinServ, L&T Finance and Srei Infrastructure Equipment Finance Pvt Ltd.