The Art and Science of Infrastructure Financing: SREI Infrastructure Finance

Having dominated the infrastructure and equipment financing business across three decades, SREI Infrastructure Finance, led by Hemant Kanoria and Sunil Kanoria, strives constantly to provide innovative solutions to the business. The Kanoria brothers are ready to unleash the next phase of growth for the company which currently commands 30 per cent of the market in the infra equipment financing business. In a candid conversation with BW Businessworld’s Ruhail Amin, SREI Infrastructure Finance Chairman, Hemant Kanoria and Vice Chairman, Sunil Kanoria, talk of the company’s growth story and their vision for it in 2020.

Excerpts:

How would you describe the unstoppable success story of  SREI Infrastructure Finance in these trying times?
Hemant Kanoria:  I believe that financing is both an art and a science. If you only limit it to a science and mathematics, then it will not work. It is an art as far as the assessment of people, business and markets is concerned. At SREI, we have always believed in inclusive infrastructure. When we talk about inclusive infrastructure, it is always relevant at any particular time, whether it is 30 years, 60 years or 100 years. We do a churning of new ideas on a regular basis, as well as adapting to changing market demands. All this has ensured that our success story stays strong.

Sunil Kanoria: When we started equipment financing, it was a sector where there was literally no competition. We got exposed to international markets at a very early stage and that helped us evolve in the way we are today. The investments that we attracted from international players also played a big role in our growth and success, enabling us to command the market now.

How is SREI coping with the economic slowdown?
Hemant Kanoria: It has definitely impacted our sector. We were in a position to predict it in 2013-14 itself, and therefore our company took an informed and a well-thought-through decision that we will reduce our infrastructure financing portfolio.  Since the last six years, we have been consistently reducing it. Now our focus is on increasing our equipment financing portfolio and reducing the infrastructure financing portfolio. 

Sunil Kanoria: It has been a systemic problem. I won’t blame any particular stakeholder in the economy for this. We are all collectively responsible. In this journey, we all have to quickly learn and see what we can do together as a nation, and every stakeholder has to play its role, only then will it work.  Also, we have been proposing certain suggestions to the government stating that at this juncture we require to review our definition of non- performing assets. 

What would be SREI’s big focus in 2020?
Hemant Kanoria: As we said, we are going to focus big on the equipment financing business. We are also evaluating other businesses where we can provide services to customers without having to worry about market risks. We see that there’s an opportunity for those particular businesses, but definitely not infrastructure, at this juncture. 

Sunil Kanoria: Our core focus is to look at how we can do more with efficient capital and use technology as an enabler to create a mechanism of partnerships. The strength that we have is our understanding of the infrastructure equipment financing space and understanding the ecosystem that we have built over the years.

So, we won’t allow that knowledge and that understanding to go away while looking for more productive assets. So, if there is any B2B product that is required by the people, we are keen to play a supportive role in providing financing and leasing solutions.

With growing competition in the infra equipment financing space, where do you see SREI’s market share in the next two years?
Hemant Kanoria: At this juncture, our aim is to be cost-effective. We have to do only those businesses where we see a profit margin. So, therefore, we are not trying to chase market share.

Sunil Kanoria: If you look at the market situation – it has become challenging to access low-cost liquidity. Also because we were financing infrastructure in the past there were some concerns which will now be a thing of the past as we keep moving forward with our strategy for equipment financing. The overall sale of equipment has come down by 30 per cent in one year. So we have to grow the market and get back (on the growth path). 

In the next few years, we want to grow and get back (on the growth path) because now we have created solutions which are beyond the need of capital. The endeavour would be to provide better solutions. In our space, it’s only the banks that are our competitors. For them, it (infra equipment financing) is just one part of the business, but for us, it will always remain the core focus and we want to get back to our growth story.

With the uncertainty facing the Indian and global markets, how is SREI future-proofing its business interests? 

Hemant Kanoria: As we know, the business environment keeps on changing. So, therefore, successful organisations have to strive to stay relevant to their stakeholders. At SREI our focus is on strong internal mechanisms of churning out new ideas and staying agile enough to be in a position to adapt to market demands if needed.

Sunil Kanoria: I believe we have the ability to be innovative and do things differently and not just follow the market. This approach has been helping us keep our people engaged and motivated. Also because of our ability to transform ourselves, we have been the leaders in the segment we operate in.