Asset reconstruction company NARCL may revive Srei Infrastructure Finance Limited (SIFL).
However, asset reconstruction company NARCL may wind up SEFL, the equipment financing arm of Srei, after recovering the outstanding loan in seven years, sources told PTI.
NARCL on Wednesday won the bid to acquire two Srei Group holdings SIFL and Srei Equipment Finance Ltd (SEFL) through an insolvency process.
As per the resolution plan of NARCL, Srei Equipment Finance Limited (SEFL) will be kept inactive for at least seven years. As per PTI reports, it will not engage in any fresh lending and the non-banking financial company (NBFC) will be closed after recovering the outstanding loan.
"Upon acquisition of the companies, NARCL will not take fresh loans from SEFL and the company will be closed after recovering dues in the market and settling court cases," an official told PTI.
"SIFL, which has a clean balance sheet and few legal hassles, will be revived. As per earlier discussions, the regulators are also of the view. Continuity of business will help in saving jobs," the official said.
Currently, most of the assets are on the books of SEFL. In the past the erstwhile promoters of the NBFC had transferred the infrastructure assets of SIFL to SEFL as part of a restructuring plan, which failed to get RBI approval.
A few days ago, the promoters failed to get their companies out of the insolvency process despite a last ditch effort to clear all dues under Section 12A of the IBC.
SIFL has eight subsidiaries including SEFL and one trust. The other companies are Srei Capital Markets, Srei Asset Leasing, Controla 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 financial year (April-December 2022), SIFL reported a loss of ₹11,017 crore. In the April-December period, the total loss on financial instruments stood at ₹1,398 crore, while write-offs, depreciation and amortization stood at close to ₹500 crore.
On February 15, the committee of creditors (CoC) of Srei group firms approved the resolution plan of NARCL, which got the highest 89.2 per cent votes. The plan now awaits the approval of the National Company Law Tribunal (NCLT).
There were three final contenders for the Srei companies.
NARCL offered a Net Present Value (NPV) bid of ₹5,555 crore. Authum Investment & Infrastructure with a bid of ₹5,526 crore got the second highest number of votes with 84.86 per cent. The official said the consortium of Verde Partners and Arena Investors, which submitted a financial bid of about ₹4,680 crore, secured the third position with nearly nine per cent votes.
The total value of NARCL's resolution plan is ₹14,301 crore, which includes a cash component of ₹3,001 crore, debentures and security receipts worth ₹3,300 crore, and an uncommitted payment of ₹8,000 crore by way of optionally convertible debentures (OCDs). These payments are conditional and subject to recovery from the underlying assets over the next seven years.
The creditors had taken a cut of 55 per cent considering full recovery of the unrestricted value of ₹8,000 crore.
The total claims of the financial creditors of the two NBFCs stand at ₹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 NCLT Kolkata to initiate insolvency proceedings against the twins for a consolidated resolution.
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