NARC's offer for Srei companies not to be backed by govt guarantees

The newly formed National ARC has not offered any government backing for its offer for Srei companies.

The NARC has offered an upfront cash payment of Rs 2,100 crore and Rs 3,500 crore payable in deferred instruments.

The NARC has further proposed up to Rs 8,000 crore in uncommitted funds, on a 'pay when able' basis, which could be revised based on future recoveries from Srei’s loan assets, said a banker close to the transaction.

The Rs 3,500 crore of deferred instruments won’t be backed by government guarantees, contrary to initial expectations that NARC would issue government guarantee-backed security receipts.

Other bidders had objected to NARC getting government-backed guarantees for its acquisition of companies thereby not giving a level playing field to others.

"If government-backed lenders sell assets to a government-backed ARC then what is the necessity to go through the entire process? Lenders will prefer NARC offer as the company is backed by the government," said a bidder, asking not to be named.

Another bidder, Authum’s plan includes an upfront cash component of Rs 2,600 cr and a further Rs 700 crore in secured non-convertible debentures. Authum’s plan also proposes to pay the lenders 25 per cent of any upside on any future recoveries for the next five years, which are estimated to be Rs 1,200 crore.

The Varde-Arena consortium’s offer includes Rs 2800 crore in upfront cash, and around Rs 3,600 crore in deferred instruments such as non-convertible and optionally convertible debentures. The plan also proposes an equity contribution of Rs 1,400 crore as well as an estimated Rs 6,000 crore in uncommitted funds, which would depend on future recoveries from SREI’s loan assets, the banker said.

Srei Infrastructure Finance and Srei Equipment Finance were admitted for bankruptcy following applications filed by the Reserve Bank of India in October 2021 after the boards of companies were superseded by the central bank and an administrator appointed. Forty-four lenders have made claims of Rs 32,750 crore against the companies.