Srei Infrastructure Finance (SIFL) has consolidated 100% share holding in Srei Equipment Finance (SEFL) after taking over 50% share in Srei Equipment.
Srei Infrastructure Finance (SIFL) has consolidated 100% share holding in Srei Equipment Finance (SEFL) after taking over 50% share in Srei Equipment. This also followed the closing of BNP Paribas’ acquisition of 5% equity in Srei Infrastructure, which was announced in December 2015.
Srei Infrastructure vice-chairman Sunil Kanoria said with the acquisition, which was basically a swap, Srei Equipment has become a 100% subsidiary of Srei Infrastructure and profits of Srei Equipment would be fully consolidated with Srei Infrastructure from the coming quarter.
While Srei Equipment reported a net profit of R115 crore in FY16, Srei Infrastructure posted a net profit of R57 crore.
“With the consolidation, Srei’s net worth will increase to about Rs 4,800 crore, effecting in an immediate and substantial jump in shareholder value”, Kanoria said, adding that the book value per share will almost go up from Rs 50-54 per share to Rs 90-95 per share.
While Srei Infra has net worth of Rs 2,700 crore, SREI Equipment has net worth of Rs 2,300 crore. Taking into consideration the offset on account of equity transfer, the net worth after consolidation has been assessed at Rs 4,800 crore, Kanoria said.
The 5% Srei Infrastructure share offered to BNP Paribas had been given from the 9.6% treasury stock, which means there has been no dilution of shares, while transferring the equity. BNP Paribas Lease Group has received 25.15 million equity shares of Srei Infrastructure, representing 5% of the total paid-up equity capital of the company, in lieu of its entire shareholding of 29.83 million equity shares in Srei Equipment, representing 50% of the total paid-up equity share capital of Srei Equipment, Kanoria said.
He said with this consolidation, equipment financing would get more focus and there could be infusion of more capital into the equipment financing business. The company would determine the amount of capital infusion in view of the growth of construction and mining equipment sales.
Since 2012, sales of construction and mining equipment have been witnessing a declining trend. While in 2012, there was Rs 34,000 crore worth of mining and construction equipment sales, it dropped to R21,000 crore in 2016. But from February this year, sales have started picking up and witnessed a 20% month-on-month growth, Kanoria said.
He said although the project financing business is still locked, Srei Infrastructure’s business would ride on Srei Equipment’s growth.