The IPO will see Srei Equipment Finance dilute 25% stake, thus valuing the firm at up to Rs8,000 crore, says group chairman Hemant Kanoria
Srei Equipment Finance Ltd, a wholly-owned subsidiary of Srei Infrastructure Finance Ltd, is looking to raise Rs1,800-2,000 crore through an initial public offering (IPO) of 25% of the company’s shares, key officials announced on Thursday.
The public issue, which is estimated to value Srei Equipment Finance at Rs7,200-8,000 crore, will include new shares to be sold by the company as also shares to be sold by the already listed holding company. The IPO is expected to be launched by February-March next year, group chairman Hemant Kanoria said. Within the next three years, Srei Equipment Finance, which offers loans for purchase of construction and mining equipment, is looking to double its assets under management, said chief executive officer Devendra Vyas. At the end of June, it had assets worth Rs23,453 crore on its books, a fifth more than a year earlier.
Back in 2008, French financial services giant BNP Paribas SA had bought a 50% stake in Srei Equipment Finance for Rs775 crore, valuing the company at Rs1,550 crore. In December 2015, BNP Paribas cashed out, taking a 5% stake in the holding company, Srei Infrastructure Finance, then worth Rs150 crore. Kanoria said the equipment financing business had witnessed a considerable jump in demand recently. For the past few years, equipment financing business has been growing annually at 20-22%, he added.
Vyas said asset quality has been improving and after some disruption, the company has started to generate steady cash flows. “Investors like steady businesses with steady cash flows," he said. “So, we thought, it is a good time to unlock value."
Prithvi Haldea, chairman and managing director of Praxis Consulting and Information Services Ltd—the company behind primary market tracker Prime Database—said Srei Equipment Finance has good credentials. But investor appetite for the IPO will depend largely on pricing of the share sale, he added.
In the year till March, Srei Equipment Finance clocked Rs2,495.33 crore in revenue and a net profit of Rs148.84 crore, or Rs24.95 per share. The company currently has an equity base of Rs59.66 crore, which is set to expand with the proposed IPO. The company had a total outstanding debt of Rs12,931.84 crore and a debt-equity ratio of 5.23 at the end of March.