The country’s largest private sector integrated infrastructure player Srei is looking to divest up to 35% stake in Sahaj e-Village within the next financial year. Srei’s internal team is in talks with strategic investors and private equity firms for this proposed stake sale in Sahaj, which is one of its many strategic initiatives in the infrastructure space.
Although the Centre’s demonetisation move has slowed down the negotiation process with foreign and strategic investors reworking on their business models in India, the group feels the digitisation drive of the government is likely to push up Sahaj’s valuation during the stake sell-off deal as its business model is based on digital mode.
“We are looking at both strategic investors and private equity investors for the dilution of our stake in Sahaj anywhere between 10% and 35%, depending on the valuation that we get. If we get our desired value we can dilute stake by 35%. It is a matter of valuation,” Hemant Kanoria, chairman and managing director of Srei Infrastructure Finance, told FE in an interview.
According to the latest annual report, Kolkata-based Srei Infrastructure Finance held 49.47% stake in Sahaj e-Village as on March, 2016. It is expected to be Ebitda positive this fiscal.
Sahaj started its operations in 2007 to offer G2C (government-to-citizen) services in the villages of West Bengal, Bihar, UP, Odisha, Assam and Tamil Nadu. However, the model of working with the government did not work and the initiative suffered accumulated losses. In the last one year, Sahaj re-worked its business model to be financially viable by offering B2C (business-to-consumer) services. It has also expanded its footprints across the country. Now, it is present in 23 states and union territories. The number of ‘Sahaj Mitr’ or service centres has increased to to 61,359 from 36,891 during this period. These service centres operate in villages with population of 10,000 or less.
“The whole business had got re-chiselled for creating a model which is financially viable…service centres are based on a ‘brick and click’ model. As a business model, Sahaj has got further established because the digitisation is going to facilitate and accelerate our business. The whole model is based on digitisation. So for us in Sahaj, demonetisation has been an wonderful thing,” Kanoria said.
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Sahaj now acts as business correspondents for some of the banks, distributes insurance products, offers e-governance and utility services, accepts utility bill payments, offers e-commerce and e-learning facilities, among others.
“For us everything comes on the digital platform. If cash transaction is not there, it will be good for us. Thus Sahaj’s valuation should improve in negotiation with the potential investors,” Kanoria said, adding he expects the stake sale deal to by closed by March next year.
“We were proposing to do it in this financial year, but I don’t think that it would be happening in this fiscal because of the slowdown (post demonetisation). I think it may spill over to the next financial year,” he added.
The money to be raised through the stake dilution in Sahaj will be used to finance the group’s business growth. “At Srei, our strategy has been to harvest our investment at an appropriate time. Now, the business model at Sahaj has got stabilised, the business has been running for quite some years. Therefore we feel that it is an appropriate time to do some harvesting,” Kanoria stated.
Significantly, the company in April last year sold its entire 18.5% stake in telecom tower operator Viom Networks to American Tower Corporation for Rs.2,931 crore to monetise its strategic investment there.