Tag: srei equipment finance

Banks make higher-than-required provisions for Srei Group exposure

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Large public sector banks (PSBs) have proactively made substantially higher provisions, ranging from 40-100 per cent, towards their exposure to the Kolkata-based Srei Group against the usual regulatory requirement of 15 per cent.

Forensic audit

This is due to the uncertainty over what a forensic audit of the account may reveal and the haircut lenders may have to take under the corporate insolvency resolution process (CIRP) initiated against the group.

The Reserve Bank of India’s norms require banks to make a general provision of 15 per cent on their total outstanding exposure to a substandard asset. Unsecured substandard assets attract an additional provision of 10 per cent.

Bankers say they don’t want any surprises on the provisioning front in the coming quarters vis-a-vis the Srei account, which comprises Srei Infrastructure Finance Ltd (SIFL) and its wholly owned subsidiary Srei Equipment Finance Ltd (SEFL).

Moreover, recovery from the resolution of DHFL and healthy profit in the second quarter have given them the elbow room to increase the provisions.

The banks that have made higher upfront provisions towards their exposure to the Srei Group include State Bank of India (SBI, 100 per cent), Union Bank of India (UBI, 65 per cent), Bank of India and Central Bank of India (BoI, CBoI 50 per cent each), and Punjab National Bank (PNB, 40 per cent). PNB has an exposure of ₹2,600 crore to the Srei group, UBI ₹2,558 crore, BoI ₹1,024 crore in direct exposure and ₹970 crore via pooled route, and CBoI ₹1,149 crore. SBI’s exposure is believed to be over ₹2,000 crore.

₹26,476-crore borrowings

As at March-end 2021, the consolidated borrowings of the Srei Group stood at ₹26,476 crore. This includes term loans, working capital facilities, collateral borrowings and unsecured loans. Liabilities in the form of debt securities and subordinated liabilities stood at ₹2,441 crore and ₹2,785 crore respectively.

Governance concerns

RBI had, on October 4, 2021, superseded the Board of Directors of SIFL and SEFL. The central bank, in a statement, said it took this action owing to governance concerns and defaults by these companies in meeting their various payment obligations.

It appointed Rajneesh Sharma, Ex- Chief General Manager, Bank of Baroda, as the Administrator of the aforesaid companies.

The central bank’s applications for initiation of CIRP against SIFL and SEFL under the Insolvency and Bankruptcy Code (IBC), 2016, read with Financial Service Providers Insolvency Rules were admitted by the Kolkata Bench of the National Company Law Tribunal on October 8.

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Uco Bank posts 7-fold jump in Q2 net, BFSI News, ET BFSI

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Public sector lender Uco Bank has reported a seven-fold jump in its net profit to Rs 205.3 crore for the second quarter this fiscal from Rs 30.1 crore for the same period last fiscal.

The city-based lender, which recently came out of the Prompt Corrective Action (PCA) measure of Reserve Bank of India, has witnessed a significant improvement in its asset quality during the second quarter despite the fact that it recognized its exposure of around Rs 1,000 crore in Srei Infrastructure Finance and Srei Equipment Finance as non-performing assets (NPAs).

The Kolkata bench of the National Company Law Tribunal (NCLT) earlier this month gave its approval to start insolvency proceedings against Srei Infrastructure Finance and its wholly-owned subsidiary Srei Equipment Finance after the Reserve Bank of India had filed insolvency applications against the two non-banking financial companies (NBFCs).

Uco Bank MD & CEO AK Goel, without mentioning the name of Srei, said, “It will be very premature to talk about the bad loan recovery from these two NBFCs. But we will remain optimistic that a good recovery should come (through insolvency resolution process).”

During the second quarter, the bank’s NPAs in absolute terms fell 3.6% quarter-on-quarter to Rs 10,909.7 crore from Rs 11,321.7 crore in the first quarter this fiscal. The Gross NPA ratio during the quarter under review declined 39 basis points sequentially at 8.9%.



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RBI bans audit firm Haribhakti & Co for two years

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Haribhakti & Co was the auditor of Srei Infrastructure Finance, whose board was superseded by the RBI and against which insolvency proceedings were initiated last week.

The Reserve Bank of India (RBI) on Tuesday banned chartered accountant firm Haribhakti & Co from undertaking any type of audit assignments for regulated entities for a period of two years, starting April 1, 2022.

The action was taken for the firm’s failure to comply with a specific direction issued by the RBI with respect to its statutory audit of a systemically important non-banking financial company (NBFC), the central bank said in a statement.

This is the first time the RBI has taken such action against an auditor of a systemically important NBFC.

“The RBI has by an order dated September 23, 2021, debarred Haribhakti & Co from undertaking any type of audit assignment/s in any of the entities regulated by RBI for a period of two years with effect from April 1, 2022,” the statement said.

The action has been taken under Section 45 MAA of the RBI Act, which allows the banking regulator to act against auditors. The ban will not impact audit the firm’s assignments in RBI-regulated entities for the financial year 2021-22, the statement said.

In 2019, the RBI had imposed a one-year ban on SR Batliboi & Co, an affiliate of global auditing firm EY, after it found lapses in the audit report of a bank.

Haribhakti & Co was the auditor of Srei Infrastructure Finance, whose board was superseded by the RBI and against which insolvency proceedings were initiated last week.

The Kolkata Bench of the National Company Law Tribunal on October 8 gave its approval to start insolvency proceedings against Srei Infrastructure Finance and its wholly owned subsidiary Srei Equipment Finance after the RBI filed insolvency applications.

According to rating reports of March 6, 2021, by CARE Ratings, Srei Infrastructure Finance owed banks loans worth Rs 11,117.71 crore, apart from outstanding bonds and NCDs worth Rs 710.63 crore.

Srei Equipment Finance had outstanding bank loans worth Rs 16,912.21 crore and other debt instruments worth Rs 499.45 crore. All these facilities and instruments were rated ‘D’, or default grade, in March.

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Bombay HC dismisses petition by Srei promoters

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The Bombay High Court on Thursday dismissed the petition by promoters of Srei Group challenging the move by the Reserve Bank of India to supersede the boards of Srei Infrastructure Finance (SIFL) and Srei Equipment Finance (SEFL)

The petition was filed by promoters of Srei Infrastructure Finance and Srei Equipment Finance to stay the insolvency proceedings initiated by the RBI. It was taken up for hearing by the Bombay High Court on Thursday and it said it is not inclined to entertain the matter after hearing both the sides.

Also read: Srei Infra and Equipment Finance have debt obligations of over ₹29,000 crore

The RBI had on October 4 superseded the boards of SIFL and SEFL, paving the way for their resolution.

It has also appointed Rajneesh Sharma, Ex- Chief General Manager, Bank of Baroda as the Administrator of the companies under Section 45-IE (2) of the RBI Act. The RBI can now move the National Company Law Tribunal to initiate proceedings against the two companies.

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Srei promoters move Bombay HC

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Promoters of Srei Infrastructure Finance and Srei Equipment Finance have moved the Bombay High Court challenging the Reserve Bank of India’s decision to supersede the boards of the Kolkata-based NBFCs.

RBI supersedes boards of two debt-laden Srei companies

According to sources, the promoters have sought a stay on the proceedings. The case is expected to come up on Thursday.

Srei Infra and Equipment Finance have debt obligations of over ₹29,000 crore

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Srei Infra and Equipment Finance have debt obligations of over ₹29,000 crore

Banking & Finance

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The Reserve Bank of India is expected to soon initiate the process of resolution of Srei Infrastructure Finance and Srei Equipment Finance, and experts expect it to get a high level of interest from potential investors.

“The RBI’s move is a clear statement that RBI doesn’t believe the promoter and management team of Srei is capable of resolving the stress. Also, with the success of DHFL’s insolvency resolution, RBI and lender group must be confident of value preservation and a credible resolution even for Srei,” said Bikash Jhawar, Partner, Saraf & Partners.

Also see: RBI supersedes boards of two debt-laden Srei companies

He added that he expects a reasonably high level of interest in the Srei business with economic outlook, especially in infrastructure and manufacturing, looking good.

“Srei has deep linkages with brick-and-mortar companies and promoter groups in India and those relationships may be quite a draw,” he further said.

Debt obligation

Resolution bound Srei Infrastructure Finance and Srei Equipment Finance have debt obligations of over ₹29,000 crore with bank facilities of over ₹28,000 crore.

“There will be a lot of interest in the Srei companies. DHFL has paved the way for successful resolution of financial services companies,” said another expert who did not wish to be named.

Revised credit ratings

According to CARE Ratings’ recent note in March this year, Srei Equipment Finance has long-term and short-term bank facilities of ₹16,912.21 crore, non-convertible debentures (NCDs) of a little over ₹352 crore, unsecured subordinated Tier II NCDs of ₹109.8 crore and perpetual debt of ₹37.5 crore.

By March, Srei Infrastructure Finance had short-term and long-term bank facilities of ₹11,117.71 crore, long-term infrastructure bonds of ₹20.22 crore, NCDs of ₹95.9 crore and unsecured subordinated Tier II NCDs of ₹594.51 crore.

According to an Acuite Ratings report in March, Srei Equipment Finance had NCDs of ₹3,492.45 crore.

Both CARE Ratings and Acuite had revised their ratings for the Srei companies.

Bank exposure

According to sources, UCO Bank, Punjab National Bank and State Bank of India have among the highest exposure to the two firms.

Also see: Srei Infrastructure Finance Ltd stuck in 5% lower circuit as RBI supersedes co’s Board

However, most banks have been providing for their exposure to the two companies.

Superseding of boards

The RBI had, on October 4, superseded the boards of Srei Infrastructure Finance and Srei Equipment Finance (SEFL), paving the way for their resolution. It also appointed Rajneesh Sharma, Ex- Chief General Manager, Bank of Baroda, as the Administrator of the companies under Section 45-IE (2) of the RBI Act.

On Tuesday, Srei Infrastructure Finance was down 5 per cent to ₹8.17 apiece on the BSE.

Covid impact

Hemant Kanoria, former Chairman of Srei Infrastructure Finance, in the Annual Report, had said that the company was primarily dependent on borrowings from banks and other lenders for deployment of funds towards financing for asset creation. The Covid pandemic has had an adverse effect on its customers, which has affected cash flows, resulting in muted collections, he had said.

The company had also been reducing its infrastructure portfolio and realigning the equipment financing business to the extant regulations, but it was “derailed” to some extent by the pandemic.

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Reserve Bank supersedes boards of Srei Infrastructure, Srei Equipment Finance, BFSI News, ET BFSI

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The Reserve Bank of India said on Monday it has superseded the board of directors of non-banking financial companies Srei Infrastructure Finance Ltd and Srei Equipment Finance Limited due to governance concerns and defaults, adding that it will initiate bankruptcy proceedings against them.

Rajneesh Sharma, the former Chief General Manager of the Bank of Baroda, has been appointed the administrator.

Last week, a consortium of lenders led by UCO Bank sought central bank directions on pursuing recovery of dues from the Srei Group after loans worth about Rs 30,000 crore to the Kolkata-based financier officially qualified to be moved to the list of non-performing assets (NPA) this quarter.

Srei Infrastructure, and its subsidiary Srei Equipment Finance, together owe lenders and debenture holders a total of Rs 30,000 crore. Kolkata-based UCO Bank is the lead lender, with more than Rs 2,000 crore of exposure. State Bank of India (SBI)’s exposure to the group is also more than Rs 2,000 crore.

The bank loans have turned non-performing assets after the end of the September quarter, two senior bank executives told ET.

The company had earlier announced that Arena Investors, Makara Capital and others had evinced interest to invest in the company to the tune of Rs 2,200 crore. The company had formed a strategic coordination committee to coordinate, negotiate and conclude discussions with the investors.

Till date, it received expressions of interest from 11 investors and has signed non-disclosure agreements with nine of them. Two Investors — Makara and Arena — had submitted non-binding term sheets indicating their intent for investment.

Srei Infrastructure, which is a listed entity, reported a net loss of Rs 971 crore in the June quarter as against Rs 23 crore net profit in the year ago period as provisions on loans rose nearly seven times to Rs 439 crore over the same period as repayment collections were hit due to the impact of the Covid 19 pandemic.

with inputs from Atmadip Ray



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Reserve Bank supersedes boards of Srei Infrastructure, Srei Equipment Finance, BFSI News, ET BFSI

Banking & Finance

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The Reserve Bank of India said on Monday it has superseded the board of directors of non-banking financial companies Srei Infrastructure Finance Ltd and Srei Equipment Finance Limited due to governance concerns and defaults, adding that it will initiate bankruptcy proceedings against them.

Rajneesh Sharma, the former Chief General Manager of the Bank of Baroda, has been appointed the administrator.

Last week, a consortium of lenders led by UCO Bank sought central bank directions on pursuing recovery of dues from the Srei Group after loans worth about Rs 30,000 crore to the Kolkata-based financier officially qualified to be moved to the list of non-performing assets (NPA) this quarter.

Srei Infrastructure, and its subsidiary Srei Equipment Finance, together owe lenders and debenture holders a total of Rs 30,000 crore. Kolkata-based UCO Bank is the lead lender, with more than Rs 2,000 crore of exposure. State Bank of India (SBI)’s exposure to the group is also more than Rs 2,000 crore.

The bank loans have turned non-performing assets after the end of the September quarter, two senior bank executives told ET.

The company had earlier announced that Arena Investors, Makara Capital and others had evinced interest to invest in the company to the tune of Rs 2,200 crore. The company had formed a strategic coordination committee to coordinate, negotiate and conclude discussions with the investors.

Till date, it received expressions of interest from 11 investors and has signed non-disclosure agreements with nine of them. Two Investors — Makara and Arena — had submitted non-binding term sheets indicating their intent for investment.

Srei Infrastructure, which is a listed entity, reported a net loss of Rs 971 crore in the June quarter as against Rs 23 crore net profit in the year ago period as provisions on loans rose nearly seven times to Rs 439 crore over the same period as repayment collections were hit due to the impact of the Covid 19 pandemic.

with inputs from Atmadip Ray



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RBI supersedes boards of Srei Infrastructure Finance, Srei Equipment Finance

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The Reserve Bank of India has superseded the Board of Directors of Srei Infrastructure Finance Ltd (SIFL) and Srei Equipment Finance Ltd (SEFL), owing to governance concerns and defaults by the companies in meeting their payment obligations.

Rajneesh Sharma, Ex- Chief General Manager, Bank of Baroda, has been appointed the administrator of the companies under Section 45-IE (2) of the RBI Act.

“The Reserve Bank also intends to shortly initiate the process of resolution of the two NBFCs under the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 and would also apply to the NCLT for appointment of an administrator as the Insolvency Resolution Professional,” RBI said in a statement

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Srei Equipment Finance sets up panel to raise fresh capital

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Srei Equipment Finance Ltd (SEFL), a wholly-owned subsidiary of Srei Infrastructure Finance Ltd, on Wednesday said that it had received interest from international investors for proposed capital infusion.

The company, which has been facing cash flows issues in the wake of the Covid-19 pandemic-driven economic stress, has constituted a Strategic Coordination Committee (SCC), comprising independent directors to coordinate, negotiate and conclude discussions with potential strategic investors.

“The board of SEFL at its meeting held on Tuesday, constituted a Strategic Coordination Committee (“SCC”), comprising of independent directors. The SCC will coordinate, negotiate and conclude discussions with potential strategic and/or private equity investors, to raise fresh capital for the business in consultation with the management,” the company said in a press statement.

The company said it had received an “expression of interest from international investors” for the proposed capital infusion.

“The proposed capital infusion is expected to strengthen SEFL’s capital base and help the company emerge out of pandemic induced stress in Indian financial services space,” the release said.

The SCC would be chaired by Malay Mukherjee, an independent director and the other committee members, including Suresh Kumar Jain, Dr. (Mrs.) Tamali Sen Gupta, Uma Shankar Paliwal and Shyamalendu Chatterjee with invitees having relevant domain knowledge.

The committee will take forward the expression of interest received from international investors and initiate discussions with other potential suitors who have been in touch with the company over the last year in consultation with the management. The committee will be assisted by advisors and investment bankers who will be working closely with the members.

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