Global OEMs to Beeline in Indian CE Market

“Lured by infrastructure opportunity, India is likely to witness in 2011 many foreign original equipment manufacturers (OEMs) making a beeline for India. Leveraging our market leadership position, we would like to forge strategic collaborations with them which will further expand our business and benefit those players as well”, says DK Vyas, CEO, Srei BNP Paribas.
 
How had been the year 2010 for construction industry in India?
2010 has been a good year for the construction industry in India, especially after the difficult phase from the 4th quarter of 2008 till the second quarter of 2009. There was a marked improvement in the business sentiment from Q4 FY10. GDP grew at 8.6% in that quarter. A series of prompt fiscal and monetary steps taken by the Government ensured that the global financial crisis had minimum impact on India. The next two quarters registered growth of 8.9% each. And we expect the last quarter of 2010 (i.e. Q3 FY11) to clock at least 8.6%. Thus, 2010 is likely to see a GDP growth of 7.75%. The thrust provided to the infrastructure sector maintained the growth momentum of the construction industry. That translated into brisk business for the infrastructure and construction equipment (ICE) sector. The Volumes in December 2010, from the preliminary numbers that I have are also very good and I would say we may have ended on a high as well.
 
How did the ICE Finance segment perform during 2010?
In terms of credit off-take and profitability, 2010 was a good year. Financing as a mode of acquiring ICE in India is more than 80%. Within that, almost 80% of the financing is done by NBFCs. Srei BNP JV (SEFPL), an NBFC, has been the market leader in ICE financing in India and presently enjoys a market share of about 33%. In the first 3 quarters of 2010 (January to September), we disbursed more than Rs. 7,300 crore which is quite an indicative figure for the ICE financing industry trend for the entire year.
 
Highlight the achievements of SREI Equipment Finance for the year 2010. Please include the information related to new launch, tie-ups, expansion, and financial target achievements etc.
It has been a year, when new highs are being achieved by both manufacturers and financiers alike, and we have had our share of success as well. During the monsoons we have seen substantial traction through our program “Khusion Ki Baarish”, the engagement programs at the mining exhibition “Khul Ja Sim Sim” were received very enthusiastically by the customers and manufacturers alike. Some markets like AP and Karnataka were depressed due to obvious reasons, but others geographies have more than compensated.
 
What are your prime targets for the year 2011?
The country has an ambitious investment target of USD 1 trillion for infrastructure for the Twelfth Plan (2012-17), and within that, the share of private sector has been pegged at 50%. That sets the tone. The infrastructure thrust by the Government clearly augurs well for our business. Demand is expected to boom. With more private sector participation being envisaged, demand for equipment financing will also increase substantially. In infrastructure, the growth is expected to come from Road Sector, Irrigation, Railways and Urban Infrastructure especially with JNNURM being expanded multifold.
 
Lured by infrastructure opportunity, India is likely to witness in 2011 many foreign original equipment manufacturers (OEMs) making a bee-line for India. Leveraging our market leadership position, we would like to forge strategic collaborations with them which will further expand our business and benefit those players as well. I foresee more competition in the ICE financing space in 2011, as some of the really large foreign OEMs will be coming with their own financing arms. There is already a growing interest in the domestic sector and many new players are entering this field. We welcome this development. We believe there is plenty of room for more number of players in this arena and competition will only ensure a healthy growth of this sector.
 
Besides maintaining our market leadership in ICE financing, we are in the process of expanding into financing of other asset classes namely IT equipment, agriculture equipment and medical equipment. All these three sectors have huge potential and are aiming to strengthen our foothold in these fields before others start emulating us.
 
Presently, the total assets under management (AUM) figure for SEFPL stands at over Rs.12,000 crore. By end of 2011, we intend to scale up this figure.

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