Note ban: Srei Infrastructure Fin sees short-term impact settling down soon

Demonetisation will have a positive impact on the infrastructure sector in the long-run.

And the short-term hiccups – that the industry is witnessing now – will start “settling down” from the fourth quarter (January to March) of this fiscal, says Sameer Sawhney, Chief Executive Officer, Srei Infrastructure Finance Ltd.

With an asset under management portfolio of approximately ₹36,000 crore, Kolkata-headquartered Srei Infra is the largest equipment financier in the country.

Sectors, like infra, where government spending is done on a long-term basis are set to benefit once the money circulation cycle begins, he adds.

“I do not think demonetisation will have a significant impact on the infra sector. From the first quarter of next calendar year (January to March) you will start seeing the settling down,” Sawhney told BusinessLine during an interview.

Increased government spending apart, the other big positive could be idle money – that was lying outside the “real economy”– actually coming in. This might lead to interest rates going down.

“I am hoping that some of the money (post demonetisaton) is used to recapitalise the banks. So many ills can be taken care of,” Sawhney added.

Even business models may change at lowest levels. Payments by the sub-contractors (to their workers) are mostly still in cash. This could go cashless.

The CEO, however, does not claim Srei Infra has fully weathered the demonetisation storm. “We are making our way through it,” is how Sawhney would like to put it.

Srei admits to a decline in equipment sales, especially at the retail level or typically for used construction equipments by smaller contractors.

The good thing though is demand for engineering, procurement and construction (EPC) equipment (EPC) — such as backhoe loaders and excavators — which form the bulk of the company’s financing portfolio, seems to be on track.

“We were keen to finance smaller buyers as we go forward. But, there has been some slowdown in that segment especially where there was high incidents of cash payments,” he said. Sawhney though immediately clarifies that if demand was heading north in the first six months, post demonetisation that curve will flatten. But they are unlikely to dip substantially.

The second affected area is cash collections. There are “some delays”. But the largest player in the market has majority of its collections through cheques. “Hence for us, that (cash collections) is not a meaningful number,” he adds.

According to Sawhney, as long as there is “underlying (pent-up) demand” – through increased construction of roads or rail – then equipment sales are bound to happen and growth is expected.

He also does not foresee projects getting stalled because of want of payments from the government.

“In another two months, growth (in infra) should be back on track, unless there are further disruptions,” he maintains.

COMMENT NOW