Srei Equipment Finance, a 50-50 joint venture between Srei Infrastructure Finance and BNP Paribas Lease Group, is looking at greater contribution from the non-infra equipment lending business.
The move comes as a part of the risk-mitigation process taken up by the lender following the slowdown in construction equipment financing.
According to Devendra K Vyas, the company’s Chief Executive Officer, non-infra equipment lending is expected to account for nearly 30 per cent of overall business over the next three years (by FY18).
“There is a good scope of strengthening our non-infra lending business. Over the next three years, the segment’s contribution should move up substantially,” he told Business Line.
Having entered the non-infra segment some years ago, the company’s portfolio currently includes IT, healthcare and rural infra equipment financing. This apart, it has a pre-owned equipment financing business, too.
Srei Equipment had assets under management of Rs.18,825 crore in FY15.
Increased contribution
Of its asset portfolio, construction and mining equipment financing accounted for over 88 per cent last fiscal (down from the 93 per cent reported in FY14).
The share of non-infra segment, including pre-owned equipment financing, on the other hand, moved up 5 percentage points to 12 per cent in FY15.
IT infra financing, which now accounts for less than Rs.1,000 crore, is expected to more-than-double its share in the near-term. This apart, pre-owned construction equipment financing is set to be another focus area for the company. As of now, the two account for 5 per cent and 3.2 per cent of its portfolio mix, respectively.
Similarly, the rural infra equipment financing business is expected to grow to around Rs.700 crore over the next few years. It now accounts for 1.5 per cent of the portfolio mix.
Banking on technology
The company is banking on technology to ensure better management of its financed construction equipment assets. According to Vyas, the company has begun to use GPS-enabled chips to track equipment.
This will allow the company to see where the equipment are kept, know if they are actually being used or not, trace them in case of default, and facilitate recoveries, too.
Handheld devices have also been given to its field staff to facilitate tracking and reaching out to customers. “This will also help us improve realizations. If a person is unable to use the equipment for some reason, then we can track it down and if required help him out,” Vyas said.
All the equipment that it currently finances have GPS-fitted chips. Over the next 18 months, its entire fleet of pre-owned construction equipment will have this technology.
Profit dips
The slowdown in construction and equipment financing last fiscal followed by higher provisioning saw its profit before tax in FY15 decline 37 per cent to Rs.227 crore, total income dropped a tad to Rs.2,320 crore (Rs.2,380 crore).
Provisioning, sources said, increased by 30 per cent to Rs.337 crore in the fiscal under review, compared to the year-ago period.
Meanwhile, the company is also looking to raise nearly Rs.500 crore via a “public issue of NCDs” this fiscal to fund growth plans.
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