Infrastructure and asset finance companies are seeing a steep drop in loan disbursals amid the economic downturn. With funds tough to come by, they are targeting resources from external commercial borrowings (ECBs) and deposits to lower cost and step up lending.
For instance, Srei Infrastructure Financing said its disbursals in the last three months have been to the tune of Rs 400-500 crore, compared with Rs 5,000 crore during the first six months of the current financial year.
Two other prominent players in the asset finance business — Shriram Transport Finance and Magma Shrachi Finance – said the impact is less but there is a considerable slowdown during the third quarter. Shriram’s Managing Director R Sridhar said the disbursements during October-December this year will be of the order of Rs 2,000 crore, as against around Rs 2,500 crore in the corresponding period last year.
“The industry as a whole has shrunk in this quarter so our disbursement may not show any growth,” added Magma Shrachi Finance Vice-Chairman and Managing Director Sanjay Chamria. During the first half of 2008-09, the company had reported a 37 per cent growth in disbursements to Rs 1,900 crore.
While companies blame the slowdown in economic activity as one of the reasons for a drop in disbursements, access to funds is another problem they are grappling with. Slowdown has meant that many of the projects, which were found viable earlier, are no longer the best bets. Many promoters have also postponed their implementation as finding resources for them is difficult at present.
Srei Infrastructure Vice Chairman & Managing Director Hemant Kanoria said even the measures taken by the Reserve Bank of India to infuse liquity into the system has not helped so far. The company has lined up external commercial borrowings of around Rs 4,000 crore, but it is yet to receive a go-ahead from the regulator.
“In the first half of the year, we managed to meet the disbursement requirements as domestic sources of funding were affordable. During the last two months, the cost of funds has gone up in the domestic markets and ECB, though available, is subject to government’s approval. We have hardly been able to raise a substantial amount,” Kanoria said. “Liquidity has eased and the cost of fund is marginally down, but not to the desired extent. Various measures by the government have not percolated to the end-users,” Chamria added.