Srei Equipment Finance on fundraising spree, plans $500 m debt issue

Srei Equipment Finance, an equal-stake joint venture between Srei Infra and with Paribas, is planning to raise about $500 million in tranches through a Medium Term Note (MTN) issue on the Singapore Stock Exchange. This comes shortly after parent Srei Infrastructure said it would mobilise up to Rs 1,000 crore through bonds in the domestic market.

The whole of $500 million won’t be raised in one go, but in tranches.

The issue was planned three months back, but wasn’t launched as costs of funds were found to be too high.

“The fundraising plan is at the drawing board. The prospectus was actually filled three months back but the market then was not cost-effective. The current one is the renewal of this self prospectus,” J Moses Harding, Group CEO, liability and treasury management, Srei Infrastructure Finance, told dna.

The Srei JV said the proceeds from each issue of notes will be applied towards financing import of infrastructure equipment into India in accordance with Reserve Bank of India regulations.

Srei Equipment would try to reduce borrowings and explore alternate avenues of funding evaluating various funding opportunities to lower its cost of funds, including focusing on funding options through non-traditional banks for products such as external commercial borrowings and retail debt instruments such as debentures,” the company has disclosed in the prospectus.

Interestingly, the aggressive fund raising plan comes at a time when, in its own admission Srei Equipment would be having difficult times ahead.

“The issuer expects its financial results for the quarter ended June 2015 to be weaker than its financial results for the quarter ended June 2014. In particular, among other things, there is likely to have been an increase in its NPAs and a decrease in its profits, revenues and income for the quarter,” Srei has disclosed.

It is expected to report muted financial results owing to a combination of factors, including RBI’s recent revised guidelines on NPA classification that requires assets which are unpaid and remain outstanding for more than 150 days to be classified as NPAs against the previous norm of 180 days, Srei has told its prospective foreign investors. Cancellation of coal blocks and also economic slowdown in the Indian economy over the last several years have continued to negatively affect company’s financial performance, it said.


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