Forensic audit report on Srei group companies likely by month-end

Shobha Roy | | Updated on: Dec 01, 2021
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Lenders to decide on qualifying their exposure to firms as fraud after seeing the report

The forensic audit report on the two Srei group entities — Srei Infrastructure Finance and Srei Equipment Finance — is expected to come out by the end of this month. Once the report is out bankers will be able to decide on whether to report their exposure to the companies as “fraud”.

“They are doing a detailed audit of all the transactions and we are hopeful that the report would be submitted soon. We will be able to take a decision on whether or not to qualify our exposure to the account as fraud only after seeing the report,” a senior bank official told BusinessLine on conditions of anonymity.

It may be noted that Srei Infrastructure Finance, had in April, appointed KPMG Assurance and Consulting Services LLP and DmKH & Co as forensic auditors on the advice of lender banks.

A special audit conducted by the RBI in December 2020 and January 2021 revealed ever-greening of loans, negative capital-to-risk (weighted) assets ratio (CRAR) and default in payments of over ₹10,000 crore to lenders, prompting it to supersede the boards of Srei Infrastructure Finance and Srei Equipment Finance.

Claims admitted

The RBI-appointed administrator has admitted claims of around ₹31,868 crore of the total claims of around ₹34,223 crore received from the financial creditors for their exposure to Srei Equipment Finance Ltd (SEFL). It rejected claims to the tune of ₹1,606 crore while claims of close to ₹751 crore are still pending verification as on November 15.

Of the total claims of around ₹149 crore from operational creditors, the administrator has admitted claims amounting to ₹73 crore while the remaining (₹76.20 crore) is under verification. The administrator has also admitted claims to the tune of ₹257 crore from financial creditors for their exposure to Srei Infrastructure Finance.

Creditors of Srei Infrastructure Finance and its wholly-owned subsidiary Srei Equipment Finance were asked to submit their claims to the administrator by October 22 since the corporate insolvency resolution process (CIRP) was initiated against the two companies.

The Kolkata Bench of the National Company Law Tribunal (NCLT), had, on October 8 given its approval to start insolvency proceedings against the two companies after the RBI filed insolvency applications against them.

Citing governance concerns and defaults by the two NBFCs in meeting their various payment obligations, the RBI, on October 4, superseded their boards and appointed Rajneesh Sharma, former chief general manager of Bank of Baroda, as the administrator of the companies. The Central bank also constituted a three-member advisory committee to assist the administrator in discharging his duties.

Published on December 01, 2021

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