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SREI: Driven By Challenges
SREI Infrastructure Finance is among NBFCs that keeps flying high even in trying times. A BW Businessworld insight into the success mantra of the company and the men behind it.
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Hemant Kanoria, chairman of India’s largest infrastructure financing company, SREI Infrastructure Finance, is a man of few words – unless it is business.
His corporate office is tucked away in an imposing building in the city of Kolkata, with massive lawns guarded by security men constantly chatting over their walkie talkies.
After a short wait, we get to meet the man who has steered SREI into controlling 33 per cent of the market for equipment financing in the country. Kanoria is a man who knows his business and is known for his innovations. Across the three decades, the company has been in business, SREI Infrastructure Finance has sailed through many challenging times under his leadership.
We ask him about the major factors that have made SREI such a powerful brand. “We have been in the equipment financing business, which has been our core business for three decades,” says Kanoria. “Even though we are 30 years old, we still feel we are very young. In the last three years, the biggest learning for us has been that we’ve tried to adapt ourselves to the environment and adjusted to market challenges,” he goes on to say.
Since infrastructure financing is a niche sector, the conversation shifts to the advantages and disadvantages of being a first mover. “In the last 30 years, the infrastructure sector evolved. Initially, when we started in 1989, there was no competition because we were the first to get into equipment financing. The margins were very high, no marketing was required. But then the entire market got into a turmoil in the mid-1990s and then again it went through a turmoil in the late 1990s,” he says. “Subsequently competitors started coming (into the business) and our competitors were banks and multinational financial institutions like GE Capital. Many came into this particular field of equipment financing because they were very large internationally. They found that the market had developed and there was an opportunity, as SREI was doing very well even through the challenging times,” recalls Kanoria.
With infrastructure financing becoming a lucrative business, there has been a steady rise in competition. “Competition is good as it makes one better and is intrinsically important for the growth of the economy and pricing options for customers. We love competition as a matter of fact. More the competition, the better it becomes,” muses Kanoria.
Focus on technology
SREI Infrastructure Finance is now moving toward its next phase of growth with technology as a cornerstone of the growth strategy.
“In the last four to five years we have tried to embrace transformational technology because we knew that fintech companies are coming in. So, through the auction of repossessed equipment and through the digital marketplace iQuippo, we are betting big on online,” reveals the SREI founder.
Notwithstanding the success story, Kanoria has scripted for SREI and despite the brand’s position of leadership in the business, the company’s market capitalisation has taken a knock of late, along with that of most non-banking finance companies (NBFCs).
A cursory look at financing companies as a class, shows that most have lost money in recent times. The reason cited most often is laborious clearance systems which businesses have to go through to implement new projects. Speaking of his strategy to overcome the current market challenges, Kanoria says, “We have been increasing our equipment financing portfolio, but reducing our infrastructure financing portfolio. And so, today as we talk, our infrastructure loan portfolio would be almost about 30 per cent of what it was in 2013-14.”
Prodded on the challenges the business faces today, Kanoria says, “There are multiple issues and that is the reason why we have seen investments getting reduced in infrastructure and manufacturing sectors in the country. Unfortunately, we have very torturous ways of addressing a problem, when it has a very simple solution in reality. We need to start looking at the problems and finding out solutions that are simple.”
“I’m sure for every problem, there are simple solutions,” he goes on to say philosophically, speaking of the business environment financing companies have to grapple with, “That is how we look at it.”
Yet SREI began its journey by financing infrastructure projects, so we wonder if it would consider revisiting investments in infrastructure. “At present, we are going to focus on the equipment financing business,” says Kanoria, without mincing words.
“We finance construction, mining equipment, healthcare, agriculture and technology equipment. We are going to focus on these. We are also evaluating other verticals, in which we can provide value-added services to customers. I think there could be an opportunity for those businesses – but definitely not infrastructure at this juncture,” he says with certainty.
The business philosophy
Kanoria believes that businesses need to always be agile, contemporary and innovative. That is the mantra that has driven SREI over the three decades that it has been in business. “Every time we have dealt with a crisis, it has made us wiser. So, we have institutionalised the process of doing this brainstorming on an ongoing basis. So, this has been one of our main learnings,” reveals Hemant Kanoria.
“The second learning, I would say, is that we need to have the right people with requisite competence in the team. A committed team with high integrity and clarity makes a big impact on business and we are blessed to have it. The final learning is about being profitable at all times. Since we are a corporate and all of the businesses are for-profit, so they have to be profitable,” he says, underscoring his success mantra.
Also read: The Art And Science Of Infrastructure Financing: SREI Infrastructure Finance