15 December 2019

Interview - DK Vyas (SREI BNP Paribas)

The prospect for the CE financing industry is very bullish

 

With over 25 years of operation, Srei Infrastructure Finance Ltd has been a pioneer in infrastructure financing. The firm today provides financial assistance in leasing and hiring of equipment and machineries to various construction companies. DK VYAS, CEO, SREI BNP PARIBAS, responded to queries from  CONSTRUCTION OPPORTUNITIES.

 

The Indian government’s aim of fast- tracking infrastructure projects is expected to throw open new prospects for the CE sector. What is your view? 

Within six months in office, the government has undertaken numerous positive steps that have resulted in a perceptible change in business sentiment.  Prospects are also brightening up in the infrastructure arena. Considering the condition of global commodity prices and low inflation figures in India, the interest rate may plateau for sometime and is more likely to go down in the future than move up. I am hence optimistic about the prospects of the infrastructure sector and am waiting for a major demand escalation in construction and infrastructure equipments.

 

As a firm offering construction equipment finance how is Srei planning to support equipment buyers on one end and manufacturers on the other?

As a financier, we maintain strong relationships with manufacturers and our buyers. Apart from being a conduit for credit delivery we also provide valuable tips and guidance, especially to the new players, on various topics like mode of assets, type of financing as per respective customers, order book and how long they would need the asset. The ability to provide right guidance to our customers’ provides us an edge over our competitors and also helps us build a very loyal customer-base. The focus towards customer satisfaction has qualitatively helped us in expanding our customer base.

 

Give us an idea of the current financing trends when it comes to construction equipments?

Given the policy framework within which we have to operate, loan financing has been the principal vehicle. Leasing would have been an ideal financing choice for high-value assets like construction and infrastructure equipments in countries like India. However, lack of clarity in the policy has led to application of both Service Tax and VAT on the same transaction, ultimately eroding the economic advantage of leasing requirements. Worldwide, in both developed and developing nations, leasing has been an empirically proven cost-competitive tool for capital creation. Unfortunately, there is not adequate awareness about its benefits at the policy-making levels. In countries like India, facing an infrastructure deficit and price-sensitive nature of infrastructure players, revival of leasing is a must. We are hopeful that with infrastructure growth gaining momentum and with more equipment manufacturers setting up their production base in India, manufacturers and financiers will come together and jointly convince our policy-makers to revive leasing in India. We were the first to set up an equipment bank in India under the Quippo brand. We have pioneered in renting of equipment operational and maintenance facilities and also provides disposal of used equipment; preferably through auction. To some extent, we have been successful in promoting the concept of equipment renting in India, which is another cost-effective route for capital creation. The practice of rental is quite prevalent in India. However, registration of construction equipment is a must for organised growth. The government needs to ensure that it is actively implemented.

 

What are your expectations from the government to facilitate business prospects for equipment financing firms such as yours?

The Central government needs to allot more power and autonomy to the State governments while executing infrastructure projects and especially in framing policies as per the respective needs. Additionally, if non-negotiable principles for land and environment policies can be outlined by the Central governments, each State governing body can frame their policies accordingly. This can also address the concerns over delays in project execution due to non-availability of land, environment and forest clearances. Since we now have a Prime Minister who has headed a State government for more than a decade and he is someone who strongly believes in state autonomy, I am optimistic that in near future States may get a larger say in designing their policies. The scenario can result in a very healthy inter-state competition, wherein the infrastructure creation can take off in a big way. This can augur evidently towards the economy. Though at a nascent stage, the CE market is poised to grow exponentially with the evolving infrastructure requirements. Also many multinationals have shifted their manufacturing base to India and much more will follow. Hence, the manufacturers and the financiers need to come together and interact jointly with the government in making our policy-makers understand the need to undertake qualitative measures for the sector’s growth. The prospect for CE and CE financing industry is very bullish and the sector will experience robust growth at least for the next few decades.

 




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