Most banks have been providing for their exposure to the two companies
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.
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.
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.
According to sources, UCO Bank, Punjab National Bank and State Bank of India have among the highest exposure to the two firms.
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The RBI had, on October 4, superseded the boards of Srei Infrastructure Finance and Srei Equipment Finance (SEFL), paving the way for their resolution.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.
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.