As the Reserve Bank of India is conducting a particular audit in Srei Infrastructure Finance and its subsidiary Srei Equipment Finance, chairman Hemant Kanoria says the particular audit will quickly conclude and will quell all “unnecessary speculation”. In an interview with Mithun Dasgupta, Kanoria claims that Srei will be capable to service all its creditors in an orderly manner. Edited excerpts:
The Reserve Bank of India is conducting a particular audit in Srei Infrastructure Finance and its subsidiary Srei Equipment Finance. Isn’t it uncommon for the regulator to conduct such an audit?
The RBI conducts different inspections/audits from time to time in entities beneath its regulations. The regulator has not too long ago directed NBFCs to align themselves with the norms that govern banks, in particular places like provisioning. We have began adhering to these regulations and are at present in the method of altering our enterprise model. This transition will not occur overnight. The USP that we had was the flexibility of NBFCs in the financing structure. But because regulations have evolved, we are transitioning into the present suggestions. Srei has and will usually comply with the regulatory suggestions prescribed by the banking regulator. The particular audit will quickly conclude and will quell all unnecessary speculation.
You have decided to exit the infrastructure project finance and has been focusing on expanding the gear finance portfolio, mostly by way of co-lending arrangements. How resilient is this enterprise model in this difficult atmosphere?
Our model has been to finance against assets/projects/securities, which are monitored on a continuous basis, so that if the will need arises, our teams can step in to address the underlying troubles and recover the revenue. The NBFC model has permitted us that flexibility in the previous. Under extant suggestions, there is closer alignment with banking regulations and offered the macro atmosphere, we have been progressively lowering our infrastructure loan book. The concentrate is now on creating the co-lending driven gear financing enterprise. Our robust OEM (Original Equipment Manufacturer) relationships, about one hundred,000 consumer base and lengthy standing institutional partnerships with capital providers is the perfect platform to tap the impending development in the CME (building and mining gear) segments. The influence of the pandemic and other macro challenges can’t final forever.
What is the repayment functionality of your borrowers? Are you witnessing improvements in collections? What is your outlook on asset excellent?
The outbreak of Covid-19 has produced an unprecedented scenario. Payments of our borrowers have been stuck with the government agencies and arbitration awards remaining unresolved due to the intermittent operations of courts. Since our clients are mostly from the building and mining space, most of them have been impacted by the lockdown and movement of migrant workers. More than half of our borrowers have requested for a single-time restructuring of their loans. Our priority is to accelerate collections and monetise different arbitration awards. Despite the challenges, we anticipate that offered the underlying assets against our loans, we will be in a position to recover our loans more than a period of time.
As per the NCLT order, meetings of creditors have been scheduled in December for the objective of their consideration, and if believed match, approving the slump exchange. What is the status now?
Unfortunately, for the reason that of the Covid and the lockdowns there was a massive disruption in finding approvals from some of the banks. It is our misfortune that the pandemic impacted the implementation of slump exchange. While we had received approvals from our lead banks, shareholders, bond holders and other creditors, we could not envisage the outbreak of Covid-19. However, we hope to come across an acceptable option in conjunction with our creditors in the greatest interest of all stakeholders. The meeting of creditors on December 23, 2020 did not take spot in the absence of the chairman appointed by the NCLT. The matters will go back to the tribunal and we will communicate their choice as and when the order is passed.
What is Srei’s consolidated borrowings? And what is the repayment strategy?
As of now, Srei has a consolidated debt of about Rs 20,000 crore from Indian banks and about Rs 10,000 crore by way of bonds and from other economic institutions. In final 31 years, the corporation has paid more than Rs 30,000 crore interest to banks and about Rs 20,000 crore as principal, usually on time. The pandemic has produced issues complex as quite a few of our borrowers’ money flows have been impacted and quite a few arbitration awards have remained unresolved. The collaterals/ securities against our loans, with each other with our receivables, are adequate to repay all our liabilities in an orderly style. We are particular that we will be capable to service all our creditors.