Public sector asset reconstruction company NARCL is likely to revive Srei Infrastructure Finance Ltd (SIFL) and wind up the group’s equipment financing arm SEFL after recovering outstanding debt in seven years, a source said on Sunday.
NARCL (National Asset Reconstruction Company) on Wednesday won the bid to take over the two Srei group firms — SIFL and Srei Equipment Finance Ltd (SEFL) — through an insolvency process.
The source said that as per the NARCL’s resolution plan, SEFL will be kept dormant for at least seven years without any fresh lending and the non-banking financial company (NBFC) will be wound up after recovering outstanding debt.
“Upon taking over the companies, NARCL will not carry fresh lending from SEFL and the company will be wound up after recovering its outstanding in the market and settling court cases,” an official told PTI.
“SIFL which has a clean balance sheet and far fewer legal imbroglios will be revived. The regulators are also of this view as per earlier discussions. Continuity of business will help save jobs,” the official said.
At present, most of the assets are held in the books of SEFL. The erstwhile promoters of the NBFC in the past had transferred infrastructure assets of SIFL into SEFL as part of a restructuring plan which failed to get the RBI nod.
The promoters failed to pull their companies out of the insolvency process despite a last-ditch attempt promising to clear all dues under section 12 A of IBC a few days back.
SIFL has eight subsidiaries and one trust under its fold including SEFL. The other companies are Srei Capital Markets, Srei Asset Leasing, Controlla Electrotech, Srei Mutual Fund Asset Management, Srei Insurance Broking, Bengal Srei Infrastructure Development, and Srei Mutual Fund Trust.
In the nine-month period of the current fiscal (April-December 2022), SIFL reported Rs 11,017 crore loss. In the April-December period, total impairment on financial instruments was Rs 1,398 crore while write-off, depreciation, and amortization stood at close to Rs 500 crore.
On February 15, the Committee of Creditors (CoC) of the Srei group firms approved the NARCL’s resolution plan which received the highest vote of 89.2 per cent. The plan now awaits the approval of the National Company Law Tribunal (NCLT).
There were three final suitors for Srei companies.
NARCL offered a Net Present Value (NPV) bid of Rs 5,555 crore. Authum Investment and Infrastructure with a bid of Rs 5,526 crore received the second-highest vote with 84.86 per cent. The consortium of Varde Partners and Arena Investors, which had submitted a financial bid of approximately Rs 4,680 crore, bagged the third position with around nine per cent vote, the official said.
The total value of NARCL’s resolution plan stands at Rs 14,301 crore which includes a cash component of Rs 3,001 crore, debentures and security receipts worth Rs 3,300 crore, and an uncommitted payment of Rs 8,000 crore through Optionally Convertible Debentures (OCDs). These payments are conditional and subject to recovery from underlying assets over the next seven years.
Creditors had taken a haircut of 55 per cent considering a full recovery of the uncommitted value of Rs 8,000 crore.
The total claims of the financial creditors of the two NBFCs are Rs 32,750.22 crore.
The Reserve Bank of India (RBI) superseded the boards of SIFL and SEFL in October 2021 due to governance concerns and repayment defaults. The banking regulator approached the NCLT Kolkata to initiate the insolvency proceedings against the twins for a consolidated resolution.
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