Srei Infra Fin aims to double South India biz in 3 years

Srei Equipment Finance — a 50:50 JV between India’s Srei Infrastructure Finance and the French BNP Paribas Lease Group — has envisaged a robust three-year roadmap, during which it aims to double its balance sheet in South India, buoyed by a strong push towards leasing business.

The company views South India as a major base, thanks to the growth in irrigation, iron ore, urbanisation, and road construction.

The region contributes a third of the company’s overall balance sheet. While the total assets under management that Srei Equipment Finance holds in the country stands at over Rs 18,500 crore, the same for South India, as on September 30, 2015, stood at Rs 5,812 crore.

Srei Equipemnt Finance now plans to double the southern region’s balance sheet to around Rs 12,000 crore by 2018.

Lease loading

Around 10 per cent of the company’s balance sheet size is occupied by its equipment leasing business, as against the larger share earned through loans.

According to Srei Equipment Finance (Srei BNP Paribas) Chief Executive Officer Devendra Kumar Vyas, “Until now, we used to provide leasing options to customers on a need-based demand. But lately, we have felt that since the economy has been in a downturn, customers want to avoid stress on their balance sheets, and on credit. Hence, many have moved opted for leases (rather than loans), and approached us enquiring about lease options, and we want to push the same.”

In must be noted that Srei Equipment Finance provides an operating lease to customers, for which the former buys equipment and leases it to the latter for a set period. The company offers what is called an operating lease, by which the asset risk is borne by the lessor, hence aiding the lessee.

“We have planned to introduce a new lease product for the first time in South India, which will be available for customers for a minimum period of one year, to a maximum period of three years, during which equipment may be rented. After that the lessee has the option to return the equipment or review the lease agreement,” Vyas told Deccan Herald.

While the lease format is mired in a web of taxes at present, the company is hopeful that with the GST coming in the near future, it will pick up.