The year under review was one of the
most challenging for Srei. In the
aftermath of the NBFC crisis that
unfolded across India’s financial
system in September 2018, access to
funds virtually disappeared. The result
is that consolidated disbursement
declined by 23 per cent during second
half of the year as against the growth
of 13 per cent during the first half
compared to corresponding periods of
the previous year. In the challenging
environment, the Company focused
on enhancing liquidity and business
This also impacted the Company’s performance during the second half of the year. While consolidated total income and PAT grew by 28 per cent and 66 per cent respectively in the first half of the year over the corresponding period in the previous financial year, there was a slowdown in the second half. The Company's topline grew only by 13 per cent and bottomline grew only by 5 per cent during the second half of the year compared to corresponding period of the previous year. However, we still managed a positive growth in net profit for the entire year.
The challenges that the Company is
now facing are different. There is a
liquidity crunch, which should not be
confused with a solvency challenge.
One window of funding may have
closed, but the government and
regulator, well aware of the problems,
intervened proactively to allow NBFCs
to enter the co-lending business
through a partnership with banks.
The macro-fundamentals remain strong; the country also now has a strong and stable government reelected with an overwhelming majority. This indicates that the economy will continue to grow and co-lending will help players like our Company grow our business.
The Company’s competence lies in
the management of economically
productive assets, and this is the
value-addition that we bring to the
co-lending exercise, while banks will
provide the bulk of funds. Besides,
co-lending will allow the Company to
moderate the leverage on our Balance
Sheet and our cost of capital – a winwin for the Company and the banks.
This secure volume-driven approach
will strengthen Return on Equity and
business sustainability in the coming
The Company is also focused on enhancing the revenue mix where securitisation and co-lending will play a prominent role. In the post GST environment, leasing will be a key driver in fresh asset creation; the Company is equipped to promote leasing. The message that I need to send out is that the Company is making a greater use of tools to address prevailing realities, entering co-partnering and co-lending programmes, while leveraging securitisation and other solutions.
The result is that we are optimistic of
riding through this downtrend as
well. On the overall, the Company will
continue to build on its strengths to
reinforce our position as the country’s
only pure-play infrastructure financing
There are compelling reasons why
sustained investments need to be
made in Indian infrastructure.
One, India is still largely an underinvested country from an infrastructural perspective. A simple comparison with the quality and quantum of infrastructure in China indicates how much we still need to cover to achieve a world-class infrastructure standard. This highlights years of sizable investments still to be made.
Two, the question is not just of
investments in infrastructure, but
of a larger issue of making India
globally competitive so that India’s
low cost manufacturing base can be
fully leveraged. It is an open fact that
India’s infrastructure disadvantage
– in terms of relatively low scale
and correspondingly high cost – will
need to be structurally corrected.
In view of this, we believe that
increased infrastructure investment
is inseparable from India’s growth
Three, Prime Minister Narendra Modi has set an ambitious target of USD 5 trillion GDP by 2024, from USD 2.7 trillion now. This calls for a commensurate addition to the carrying capacity of our infrastructure.
Each of these realities indicates that
the kind of growth that we have seen in
the last 30 years is nothing compared
to the kind of opportunity that awaits
us in the coming years.
According to government estimates,
infrastructural investments worth
USD 4.5 trillion will be needed
in investments till 2040 across
roads, airports, ports, Smart Cities
and affordable housing projects,
among others. This could create a
powerful ripple in terms of secondary
investments, catalysing the growth of
the Indian economy.
Keeping these figures in mind, we need to plan for the long-term and configure a corresponding organisational structure and business model to graduate Srei to the next level.
We continued to be India’s leading
player in the construction, mining and
allied equipment financing spaces.
We continued to enjoy longstanding
relationships with major OEMs,
strengthening our access to the
financing of world-class equipment,
which will be needed to shrink
construction cycles and enhance site
safety. We continued to protect our
large customer base, which we believe
should enable us to carve out a larger
wallet share across the foreseeable
future when these customers intend to
buy new equipment.
The i-Quippo platform that we partnered leverages technology to enhance the digital edge in our equipment financing business. The interactive nature of this platform and the ease of transaction received an encouraging response from our customers and vendor partners. Going forward, i-Quippo will be a crucial cog in our equipment financing business as digitisation plays a major role in our innovation-driven journey.
In the area of project financing, we will venture more cautiously. Banking on our expertise, we will focus on advisory services. We will explore resolutions for stressed assets. In partnership with other financial institutions and without assuming a larger risk on our Balance Sheet, we will seek to provide innovative financing solutions for infrastructure players. Deleveraging the Balance Sheet and de-risking the business model will be a part of our long-term growth plan.