At Excon, 2011, we are offering some unique innovative products like the Asset Power" with a pre-approved credit limit, which is a co branded card with our manufacturing partner wherein a customer can avail up to 100 per cent finance for select equipment for tenure of up to four years; "Money Power" with a pre-approved credit limit, wherein a customer can avail up to 100 per cent finance for equipment for tenure of up to four years, says DK Vyas, Chief Executive Officer, Srei BNP Paribas. Excerpts from the interview.

What is the present status of the construction equipment industry and its growth as reflected in the CE financing segment?
As per our estimates, the present organised equipment market for infrastructure and construction equipment (ICE) in India should be anything around Rs 24,000-28,000 crore ($4.7-5.5 billion). Thus, the construction equip?ment financing industry should be pegged at around 85 per cent of this figure. The growth of the ICE sector will be healthy. Our calculations tell us, when our GDP grows at 9 per cent annually, the annual growth rate of the ICE sector is at around 30 per cent. But in a worst case scenario, if the annual GDP growth rate even slows down to 6 per cent, the annual growth rate for ICE will be around 20 per cent. With such growth prospects, it is no wonder that global ICE majors are making a beeline to India and setting up shops here.

Infrastructure creation has been accorded top priority. Thus, spending on infrastructure will automatically drive up spending on construction equipment. Availability of local employment opportunities in micro markets like Bihar and UP which traditionally used to provide labour, has created a shortage of labour for infrastructure and real estate in major markets in north and west and thus driving large-scale mechanization. This also augurs well for this industry. Lured by the growth prospects in India, many original equipment manufacturers are setting up their manufacturing facilities in India. Thus, this space is becoming all the more competitive and the end-user stands to gain.

What was the performance of Srei BNP Paribas in the last two quarters and how do you expect to end this fiscal?
Despite the rising interest rates and some moderation in economic growth, Srei BNP has registered growth of 60 per cent over previous year both topline and bottomline, in the last two quarters. Interestingly we have grown quarter on quarter too. Now the general mood is that the interest rate has peaked and RBI is likely to pause for a while. Thus, we expect to keep growing and achieve our target disbursement figure of Rs 15,000 crore for FY12 compared to Rs 10,000 crore in previous financial year 2010-11. The fact that Srei BNP has been diversifying into areas like financing of agricultural equipment, medical equipment and IT equipment has also helped us broadbase our product offerings and thus sustain our growth.

How do you look at the business opportunities from Excon?
Excon is the largest construction equipment exhibition in the country and Srei BNP Paribas, being the Principal Sponsor is proud to be associated with yet another edition of Excon, 2011. Excon not only gives an opportunity to display the latest advancements in construction engineering products, equipment and technology but also provides a B2B platform for closing deals with the customers with on the spot attractive and innovative financial solutions. We are buoyant on this and hope the response will be very good too.

This year the theme of our pavilion is 'Tension Mat Lo', designed to represent an Infrastructure Mart, wherein you are assured of a world of 'tension-free financing' solutions as and when you require it in the infrastructure space. With an 8,500 sq ft outdoor stall (the biggest ever by any NBFC/bank in a construction equipment exhibition), we have lined up various innovative financing schemes on display, music and movie theatre, entertainment corner and food court all under one roof at Srei Mart. We have been a founder Sponsor of Excon and our support and contribution to the exhibition continues undiminished

The cost of funding seems to be bordering on redline especially after the hikes from RBI? What is your take on this and how do you address the issue? What are the new / innovative tools used by Srei Paribas to bring a balance in this scenario?
In the backdrop of RBI's rate hikes to rein in inflation, the investment climate across the board stands affected. The rising interest rate has sharply escalated the cost calculations for infrastructure projects as debt accounts for a significant portion of their fundings. With slowing down of project implementation, the demand for ICE is bound to take a dip. Thus, equipment financing has taken a hit. In India, big project developers sub-contract parcels of the project to smaller contractors for implementation. A rise in interest rate hurts these small and medium enterprise (SME) players more severely than the bigger players as the latter can still manage to source funds from multiple channels. But the fund sources for SMEs are limited. They need financing as the equipment are high value assets. Thus, in the near term growth is bound to moderate, but once the cycle-reversal starts, investment demand will pick up, as the long-term macro fundamentals for our economy remain strong.

How do you look at the impact of new emission norms and the increasing input cost of material on the CE sector and also the financing sector?
We view this development as positive for the overall industry growth. While this requires that the manufacturers add technology and cut emissions, it is positive from both an environment perspective as well as making our domestic products at par with international standards. While there will be an increase in costs, this can be compensated by increased opportunities and better efficiencies achieved. From a financier's perspective, this will enable better resale prices.

What is the present scenario of used-equipment segment and financing for the same? What are the challenges as the market is highly unorganised with very few professional players?
The used equipment market also has immense potential. As per estimates, its market size is in fact three times that of the primary market. We intend to rely on our experience in the construction equipment sector to adequately tap this market. Presently most construction equipment are not registered - the resultant ambiguity in ownership and asset valuation prevents an orderly growth of the used equipment market.

Could you brief us about the market potential for financing of imported equipment? And as there is no third party certification system for quality of equipment imported, what are steps initiated to address the same?
The penetration of financing in imported equipment is equally high and almost about 90 per cent plus is financed directly. Imported equipment is financed in a similar way to domestic equipment. Since we have been in this business for a long period, we do not encounter any major challenge while financing imported equipment. Our processes are smooth and streamlined and we offer our services in a seamless way, such that the customer does not feel much difference. The equipment suppliers also contribute to ensure that the assets are delivered to the customers in a hassle free manner. We have approved ECB lines which we do use to finance imported equipment but the volatile currency markets and poor sentiment has increased costs.

Could you also tell us the changing trends in financing especially in the mining sector?
Mining is a very significant part of the industry, whether it is coal and lignite, ferrous and non ferrous. The opening up of coal mining and allocation of blocks present significant opportunities. The going has been slow due to environmental and policy issues but we do see privatization as inevitable and therefore more mechanization. Iron Ore is in a mess currently and till this is resolved we do not see much activity here.