Srei Infrastructure Finance looking to exit non-core business
Kolkata: Srei Infrastructure Finance Ltd, a Kolkata-based lender with Rs37,500 crore in assets under management, is looking to sell its non-core businesses, including parts of its equipment rental business.
“Our objective is to sell our investments one by one except (those) in equipment finance and project finance,” said Sunil Kanoria vice chairman of Srei Infrastructure, in a recent conference call with analysts.
Srei now intends to focus on its core business of project and equipment financing, and going forward, will not invest in other areas, he added.
The portfolio of such strategic investments has grown through the years amid a challenging environment, according to Kanoria.
Srei Infrastructure values its strategic investments at around Rs1,160 crore at cost. Of this, Rs910 crore is invested in various roads projects.
With construction of roads regaining momentum, Srei is scouting for potential investors in Bharat Road Network Ltd, its subsidiary which has invested in road projects, said chairman Hemant Kanoria.
Srei is also looking for strategic investors in Srei Sahaj e-Village Ltd, an enterprise which has created a brick-and-mortar infrastructure in at least 61,000 villages to provide digital services. This initiative too has gained the necessary “maturity” for Srei to “unlock value”, Hemant Kanoria said.
Srei’s equipment rental business, run through four firms under the Quippo group, could also see some streamlining going forward, according to the Kanorias. This business generated around Rs100 crore in revenue in the nine months till December and has started to turn profitable, according to Sunil Kanoria.
Even as Srei scales back its investments in these businesses, it will make sure they have enough resources to pursue growth, Hemant Kanoria said, adding the group is not looking to sell any of these businesses at one go.
The first step towards streamlining the portfolio of Srei’s strategic investments is “price discovery”, he said. Various options of finding potential investors for these businesses are being explored.
With Srei deciding to divest these investments, the roads business could be taken public within a year, said Vishal Modi, an analyst at Kim Eng Securities India Pvt. Ltd.
Srei is also looking to dilute its stake in the rural enterprise, but divesting parts of Quippo could take some time because it has only now started to see revival in demand, he added.
The Kolkata-based company made substantial investments in the infrastructure sector outside its core portfolio of project and equipment financing, but these didn’t pay off as anticipated, said another analyst, who asked not to be identified. For instance, a lot of capital is stuck in Bharat Road Network, which the management is now trying to liquidate and deploy in its lending business, this person added.
“Yes, these businesses took longer than expected to take off but that does not mean there’s been any diminution in their value,” said Hemant Kanoria, citing the profitable sale of the mobile tower business—Viom Networks Ltd—in April last year. Srei received Rs2,931 crore from the sale as against an investment of Rs1,598 crore. Srei also has three operational special economic zones (SEZ) and has no immediate plan to dilute its ownership in this business, according to Hemant Kanoria.
However, in the equipment-leasing business, the company may look at unlocking value from its oil and gas and energy portfolios, he added.