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Srei Equipment Finance Ltd (SEFL), a wholly-owned subsidiary of Srei Infrastructure Finance Ltd, on Wednesday said that it had received interest from international investors for proposed capital infusion.
The company, which has been facing cash flows issues in the wake of the Covid-19 pandemic-driven economic stress, has constituted a Strategic Coordination Committee (SCC), comprising independent directors to coordinate, negotiate and conclude discussions with potential strategic investors.
“The board of SEFL, at its meeting held on Tuesday, constituted a Strategic Coordination Committee ("SCC"), comprising of independent directors. The SCC will coordinate, negotiate and conclude discussions with potential strategic and/or private equity investors, to raise fresh capital for the business in consultation with the management,” the company said in a press statement.
The company said it has received “expression of interest from international investors” for proposed capital infusion.
“The proposed capital infusion is expected to strengthen SEFL's capital base and help the company emerge out of pandemic induced stress in Indian financial services space,” the release said.
The SCC would be chaired by Malay Mukherjee, an independent director and the other committee members, including Suresh Kumar Jain, Dr. (Mrs.) Tamali Sen Gupta, Uma Shankar Paliwal and Shyamalendu Chatterjee with invitees having relevant domain knowledge.
The committee will take forward the expression of interest received from international investors and initiate discussions with other potential suitors who have been in touch with the company over the last year in consultation with the management. The committee will be assisted by advisors and investment bankers who will be working closely with the members.
Restructuring proposal
Kolkata-headquartered Srei group has total debt outstanding of nearly ₹27,000 crore, including ₹18,000 crore outstanding to as many as 15 lenders, including SBI, Axis Bank and UCO Bank, among others.
During the quarter ended December 31, 2020, Srei Infrastructure Finance posted a consolidated net loss of ₹3,810 crore of higher and accelerated provisioning as a prudent measure.
“Owing to Covid-19 pandemic, extended lockdown, extension of moratorium to the borrowers and operating lessees, non-availability of moratorium from lenders and loan loss provision, SEFL’s business has incurred loss and cash flow mismatch during the nine months period ended December 31, 2020 and its net worth has reduced,” the company said in the notes to accounts accompanying the financial results.
While the company has been in discussions with the lenders for a possible restructuring, nothing has materialised.
Srei has proposed a structure where it could make repayments in a manner that would be aligned to its customers' cash flows. The company is currently amid consultations with the creditors for an orderly realignment to make the payments synchronised with its collections, a company spokesperson told BusinessLine .
Two rating agencies—CARE Rating and Acuite had recently downgraded the various instruments of Srei Infrastructure and Srei Equipment Finance to junk rating.
The lender banks, which have been controlling Srei Equipment Finance’s cash flows and pre-authorising all payments had also recently put a salary cap and all other dues, including statutory dues. The cap on salary had led to an exodus of people in the senior and mid-management levels. Since December last year, the company saw close to 180 exits, including 8-10 in the senior management level following the cap on salaries.
“For NBFCs, money is the raw material. SEFL has been continuously exploring opportunities to strengthen its capital base. The expression of interest from renowned global institutional investors reflects the confidence that international investors have in Srei's business. The company will be working towards resolving matters with the creditors at the earliest.” The release said.
The SCC will be the nodal point for a comprehensive cash flow realignment plan with banks and financial institutions and all external service providers, including investment bankers, lawyers and consultants.
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