RBI-appointed Srei administrator assures job security to employees

Group to restart business soon; to focus on recovery

The Reserve Bank of India (RBI)-appointed administrator of the Kolkata-based Srei group met its senior management and assured them that there would not be any job losses during the transition period.

Rajneesh Sharma, the administrator, also said the non-banking financial companies of the group would restart their business soon and focus on loan recovery, sources in the know said.

On Monday, the RBI superseded the boards of Srei Infrastructure Finance and Srei Equipment Finance owing to governance concerns and defaults by the companies in meeting their payment obligations.

Srei Equipment Finance (SEFL) is a wholly owned subsidiary of Srei Infrastructure Finance (SIFL), which is listed on the stock exchanges. A few years back, all the assets of SIFL were transferred to SEFL, and it was the latter that was extending loans. SIFL was only involved in advisory services.

Construction and mining equipment finance was the main focus of SEFL, contributing about 85 per cent to its revenue.

The administrator’s plan to restart business is seen as a significant step towards the revival of SEFL. This is because the company had to stop extending loans in November last year, when banks took control of Srei’s cash flows, and it had to take prior approval from them for any expenses.

The group had assets under management (AUM) worth Rs 39,498 crore on a consolidated basis in 2020-21. The group’s revenue was 3,488 crore in 2020-21 as compared to 6,120 crore in the previous year.

SIFL, the listed entity, reported 23.01 crore profit for the quarter ended June 2021, down 46 per cent year-on-year. Total income also declined to Rs 1,214.45 crore during the April-June period of 2020-21 from Rs 1,579.59 crore in the same quarter of 2019-20.

IN A SPOT

• RBI has superseded the boards of Srei Infrastructure Finance and Srei Equipment Finance
• Governance concerns, defaults on payment obligations prompted the move
• Srei has a total outstanding debt of Rs 30,000 crore, of which Rs 18,000-20,000 crore is with 15 commercial banks

Srei has a total outstanding debt of Rs 30,000 crore, of which Rs 18,000-20,000 crore is with 15 commercial banks, including State Bank of India, UCO Bank, and Axis Bank.

“The administrator indicated that the business can be restarted by extending loans selectively. The banks have collected Rs 3,000 crore from Srei by taking control of the cash flow which is in the escrow account. That money can be used for giving loans,” said a source.

The other area that the NBFC will focus on is the recovery and collection of repayments. Sharma, who retired from public sector lender Bank of Baroda earlier this year, was an advisor for recoveries in the same bank.

An email sent to the Srei group, seeking comment on the development, remained unanswered till the time of going to press. The assurance of the administrator on jobs is expected to provide some relief to its 1,000 strong workforce.

“The administrator emphasised on the NBFC and creditors acting as a unit for revival,” another source said.

While superseding the boards, the RBI had said it intended to shortly initiate the process of resolution of the two NBFCs under the Insolvency and Bankruptcy Rules and would also apply to the National Company Law Tribunal for appointing the administrator as the insolvency resolution professional. After the case is admitted to the NCLT, the IRP will try to find suitors for the companies.

In July, SEFL said it had received a non-binding term sheet from Singapore's Makara Capital Partners for an investment of Rs 2,200 crore by way of capital. It has also received a term sheet from USA-based Arena Investors LP for an investment of Rs 2,000 crore.

Srei’s promoters move Bombay HC against RBI action

The Srei group’s promoters have moved the Bombay High Court against the RBI’s action on Srei Infrastru­cture Finance and Srei Equipment Finance, accor­ding to sources close to the development. They’re likely to seek an inte­rim stay on any insolv­ency proce­edings against the two firms.