每日吃瓜

Overall slowdown in demand for new equipment, absence of new channels for the deployment of equipment compared to the overall availability, plummeting value of currency, lack of clarity on private coal blocks, highly depressed rental rates - all seems to have had its negative impact on the equipment finance segment. 每日吃瓜 finds out the challenges, growth prospects, and emerging trends of financing.

The infrastructure segment has been witnessing a major slowdown due to various issues with regard to land acquisition and environmental clearances. The ongoing depreciation of rupee has added to the woes. Sumit Mukherjee, National Sales Head, Magma Fincorp says, "The interest rates are at an all time high and have not lessened over a long time. BOT projects are facing delays due to land acquisition and environmental clearances. This has had an impact on financial closures. All these factors have severely hampered the growth of equipment financing over the last couple of years. The economic slowdown in the leading world economies has also added to the woes of this segment. The infra companies are finding it very difficult to raise fresh capital and debt for the projects."

DK Vyas, CEO, Srei BNP Paribas, observes, "The financial condition of the majority of large customers in the infrastructure sector is not very healthy. They have high debt levels and lack new projects. The pace of execution of earlier projects is also slow due to multitude of reasons. These two factors along with high interest rates, rupee depreciation and a weak financial environment have affected new business volumes. This has resulted in a drop in the volumes of finance. Though the situation has not reached crisis point, we anticipate this trend continuing for few more months."

The first time user (FTU) segment is facing severe viability issues due to rising fuel costs, high interest rates. However, Shriram Equipment Finance (SEFC) is looking at this segment differently. Rakesh Chandra, Vice President and Risk Head, SEFC, says, "While most finance companies have tightened their exposures on the FTB/FTU segment because of rising defaults, we at Shriram treat this segment as niche and are focused on supporting small customers. Almost 65 per cent of our portfolio comprises of FTB/FTU customers and we will continue our growth story with their success."

It is important for the equipment finance companies to navigate through the turbulence. Rakesh says, "A focused product approach with the right structuring of deals is critical to ensure that the customer?s cash flows are met. This is certainly not a time to oversell or promote aggressive capitalisation. Being with customers, understanding their needs and business and supporting them will ensure that both customer as well as lender will sail through this turbulent time."

Looking at the future of equipment market, Vyas has this to say, "The outlook for mining equipment looks positive but in other categories we will see a de-growth of over 15 per cent this year. If the PMGSY programme starts as announced in the budget this year, we may see some increase in the road equipment."

Mukherjee says, "Tight cash flow situation of the contractors and delay in payments are on top of the mind at this point in time. The near future seems negative." However, on a positive note, Vyas concludes that more projects, faster environment and forest clearances, support in land acquisition and a general clarity in policy can revive CE financing segment in future.