NARCL may revive Srei Group’s infra financing arm, may wind up SEFL after recovery

However, the Asset Reconstruction Company NARCL SEFL, the equipment financing arm of Srei, is likely to be spun off after recovering the outstanding loan in seven years.

NARCL won the bid to acquire both on Wednesday Sarai Group’s SIFL and Srei Equipment Finance Limited (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 taking over the companies, NARCL will not take fresh loans from SEFL and the company will be closed after recovering its dues in the market and settling court cases,” an official told PTI.

“SIFL, which has a clean balance sheet and very few legal entanglements, will be revived. As per earlier discussions, regulators are of the same view. Continuity of business will help save 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.

SIFL stated that in the period of nine months of the current financial year (April-December 2022) 11,017 crore loss in the April-December period, the total loss on financial instruments was 1,398 crore while the write-off, depreciation and amortization stood close to 500 crores.

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 offers Net Present Value (NPV) bid 5,555 crores. With a bid from Authum Investment & Infrastructure 5,526 crore got the second highest number of votes with 84.86 per cent. The consortium of Verde Partners and Arena Investors, which submitted a financial bid of approx. With Rs 4,680 crore, it came third with nearly nine per cent votes, the official said.

The net worth of the resolution plan of NARCL is 14,301 crore which includes cash component of 3,001 crore, Debentures and Security Receipts 3,300 crore, and an unrestricted payment of 8,000 crore through 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 haircut of 55 per cent considering full recovery of the unrestricted value of Rs. 8,000 crores.

The total claims of the financial creditors of both the NBFCs are 32,750.22 crores.

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.