The Reserve Bank of India on Monday superseded the boards of SREI Infrastructure Finance and SREI Equipment Finance and also said that insolvency proceedings will be initiated against the Kolkata-based company soon, in the wake of governance concerns and defaults by the firms.
Rajneesh Sharma, former chief general manager at Bank of Baroda, has been appointed administrator of the companies.
“The Reserve Bank has today superseded the Board of Directors of Srei Infrastructure Finance Limited (SIFL) and Srei Equipment Finance Limited (SEFL), owing to governance concerns and defaults by the aforesaid companies in meeting their various payment obligations. The Reserve Bank also intends to shortly initiate the process of resolution of the above two NBFCs under the Insolvency and Bankruptcy Rules, 2019 and would also apply to the NCLT for appointing the Administrator as the Insolvency Resolution Professional,” the central bank said in a statement.
It is estimated that SREI Group owes around Rs 30,000 crore to lenders and bond holders. According to a recent Economic Times report, Kolkata-based UCO Bank was the lead lender with exposure of over Rs 2,000 crore, while State Bank of India too reportedly has an exposure of around Rs 2,000 crore.
SREI has been facing a huge liquidity crunch for some time now as the COVID-19 pandemic and the lockdowns imposed across states impacted cashflows of its customers and in turn SREI’s collections.
“This has been the most difficult and challenging year in the history of the company. We are operating in an environment which is completely adversarial in all respects,” Hemant Kanoria, the chairman of SREI Infra, had said in its latest annual report.
He had expressed confidence that SREI would address the issues of creditors, customers, employees, shareholders and all the stakeholders in an “appropriate manner”.
SREI Infrastructure Finance reported a net loss of Rs 971 crore in the quarter ended June 2021, compared with a profit of Rs 23 crore in the year ago quarter.
“Owing to the COVID-19 pandemic and its more virulent second wave followed by lockdown extended from time to time, the collection of SEFL from the borrowers and the lessees were severely impacted and which also adversely affected the cash flows of SEFL and has resulted in the liquidity mismatch. There is still huge uncertainty around COVID-19 pandemic and the extent to which the pandemic may further impact the group's operational, financial results and asset quality will depend on future developments, which are still unascertainable at this point in time,” the company had said then.
As per the annual report, Kanoria voluntarily reduced his pay by 30 per cent in 2020-21 and had also voluntarily decided to relinquish the remuneration for 2021-22. Other senior management personnel too reduced their salary by 20-25 per cent for the year ended March 2020-21.
The lenders of the company had taken control of SREI’s finances to recover its dues and there had been mass exits from the group due to salary delays since.
Last month, SREI Infra’s CEO Rakesh Kumar Bhutoria had resigned due to salary-related issues.
Bhutoria, the company said, had resigned to explore “alternative sectors” and also “considering the salary payment issues arising out of the Trust and Retention Account (TRA) operationalised by the bankers impacting team morale.”
SREI Infra will be the second non-banking finance company to be taken to the Bankruptcy Courts, after Dewan Housing Finance Ltd (DHFL).
Ajay Piramal-led Piramal Group on September 29 completed the acquisition of DHFL for Rs 34,250 crore.
SREI Infra shares closed up 1.4 per cent at Rs 8.60 on the BSE on Monday. The RBI announcement came after markets closed. The stock is down over 53 per cent since the 52-week high of Rs 18.39 on June 23, 2021.
