HYDERABAD: Infrastructure equipment finance business in the country is witnessing robust growth thanks to the spurt in homes and road construction sectors. Dedicated equipment finance companies, public and private-sector banks and non-banking financial companies operate in this space.
According to experts and sector insiders, the total size of the infrastructure equipment finance business in the country could be anything between Rs 25,000 crore and Rs 30,000 crore.
“We have seen good growth in infrastructure equipment finance business in FY16-17. Overall, the sector has seen a growth rate of 25-30 per cent and we expect the same growth to continue even in FY17-18 as activity is picking up in the affordable housing segment and roads construction,” said D K Vyas, CEO of Srei Equipment Finance, one of the major players in the field.
SREI claims to have a market share of about 30 per cent share in the infrastructure equipment finance business and the positive outlook for the sector stems from the push given by the government to affordable housing and also roads construction.
The government has set an ambitious target of laying roads up to 40 km per day in the country. Till February in FY16-17, about 6,500 km of roads construction has been done, seeing a growth from the previous financial year, when just 6,000 km of roads have been laid.
“The government has set ambitious targets in the roads sector. Although it has been lagging in achieving targets, among all segments in infrastructure, roads construction has seen good progress over the past one year.
Laying of roads today needs modern machinery and equipment needing huge investment. Acquiring finance is the only way to procure equipment today, as a result of which equipment finance companies have been maintaining a positive outlook,” said N Nagesh Reddy from
Builders Association of India. While already, many projects are going on in roads and
highways construction, activity is expected to pick up in the affordable housing sector soon, thereby raising hopes among construction equipment finance businesses.
The Budget for 2016-17 has given a major thrust to the affordable housing segment. As a result, says a senior official from YES Bank, many new launches are expected to take place in the housing sector in 2017-18.
“A growth in construction activity also leads to a growth in equipment financing business as 80-90 per cent of equipment cost is given as loan towards construction equipment,” the official added, forecasting a positive growth for equipment finance sector over the next one year.