Kanorias make an offer under Section 12A to take Srei out of insolvency

They feel that existing resolution plans under consideration by the Srei CoC fail to offer a fair and equitable consideration to both creditors and shareholders of Srei companies, the sources said

The Kanorias, erstwhile promoters of Srei, have submitted a resolution plan under Section 12A of the Insolvency and Bankruptcy Code (IBC), sources said.

The development comes at a time when voting by the committee of creditors (CoC) on three resolution plans – submitted by NARCL, Authum, Varde-Arena – for the two Srei companies were underway and expected to be concluded on February 14.

Sources close to the Kanorias said that the promoters want to pull Srei out of IBC. They feel that existing resolution plans under consideration by the Srei CoC fail to offer a fair and equitable consideration to both creditors and shareholders of Srei companies, the sources added.

The proposal presented by Adisri Commercial, a promoter entity of Srei, is to pay the entire claim of around Rs 32,000 crore using multiple financial instruments such as upfront cash, NCDs, OCDs and equity over time.

The offer includes Rs 3,500 crore upfront cash with NPV of Rs 7,000 crore – the highest among existing bid offers, sources close to Kanorias said. Of the Rs 32,000 crore, Rs 29,000 crore is the settlement to secured financial creditors while the unsecured financial creditors are to be paid over Rs 3,000 crore by way of equity and scheduled redemption.

However, sources close to the Srei resolution process said that Adisri’s resolution plan would have to be legally tenable.

The process as explained by the source is that for a financial service provider, the plan under 12A would have to be submitted with the Reserve Bank of India (RBI). “After accepting, only the RBI can put it forward before the CoC for voting. If the plan secures 90 per cent voting then RBI can file an application for withdrawal of IBC,” the sources said.

The administrator, Rajneesh Sharma could not be reached for comment.

It may be mentioned that in October 2021, the RBI had superseded the boards of SIFL and SEFL, and thereafter, the corporate insolvency resolution process was initiated on applications by the central bank.

Sources close to the Kanorias pointed out that under Section 230, promoters had tried making full payment with interest in October 2020, but it was rejected by the lenders and both companies were put under IBC.

The total admitted claims of financial creditors against the Srei firms are Rs 32,715.76 crore. Financial lenders include State Bank of India, Canara Bank, Punjab National Bank, Bank of Baroda, Indian Bank, Union Bank of India, IDBI Bank, UCO Bank, and Indian Overseas Bank.