Srei Infrastructure Finance Ltd on Monday said its board has approved the demerger and listing of its equipment financing business.
The move will help augment the capital of both its infrastructure finance and equipment finance businesses, the company said in a stock exchange filing.
Srei’s equipment finance business funds the purchase of new and used equipment for sectors such as construction, mining and allied equipment, which includes equipment used for earthmoving and mining, concreting, road building, material handling, material processing and other activities.
The Srei group is present in infrastructure project finance, advisory and development, infrastructure equipment finance, alternative investment funds, capital markets and insurance broking sectors.
In the past few years, there has been significant growth in sales of construction, mining and allied equipment and the industry expects the demand to remain strong in the coming years, it said, adding that this made the capital augmentation programme of both infrastructure finance and equipment finance businesses pertinent.
“The move will result in listing of the company’s equipment finance business through a composite scheme of arrangement and amalgamation and give shareholders of Srei an opportunity to directly participate in the high-growth equipment finance sector. Global and domestic investors will also be able to take advantage of the opportunities in the high-growth equipment finance sector by directly investing in our equipment finance business,” the filing said. The proposed demerger is subject to regulatory, statutory and other necessary approvals, it added.
The proposal to separate the two businesses and list the equipment financing business is expected to further infuse around ₹500 crore in the equipment finance business, the company said.
“Today’s decision will lead to substantial increase in net shareholders’ fund and allow shareholders of Srei to directly hold shares of both infrastructure finance and equipment finance businesses. The move is value accretive for our shareholders as they will have monetizable assets in form of listed shares of both the businesses,” said Hemant Kanoria, chairman and managing director, Srei.
Srei had earlier planned to list the equipment finance business through an initial public offering that would have seen the company raise around ₹2,000 crore by selling shares to the public, including fresh capital of ₹1,100 crore.
Srei Equipment Finance Ltd had filed its so-called draft red herring prospectus in December 2017 and had received approval from the Securities and Exchange Board of India for its public offering in September 2018.
For the financial year 2016-17, the company disbursed loans worth ₹11,714.8 crore, as compared to a total disbursal of₹9,158.8 crore in the previous year, according to the regulatory filing. On Monday, Srei shares rose 2.68% to ₹34.45 on BSE, while the benchmark Sensex gained 0.53% to 36,578.96 points.
This article was first published on livemint.com