Srei Group under pressure!

Last updated: 26 Nov, 2020 | 08:45 am

Srei Group under pressure!

SREI Infrastructure Finance Ltd. (SIFL) has announced that the company and its wholly-owned subsidiary SREI Equipment  Finance Ltd.(SEFL) have been undergoing a special audit, conducted by an auditor appointed by Reserve Bank of India.

What does this audit mean?  

  • The RBI Act states that the central bank may at any time order to conduct a special audit of the accounts of a non-banking finance company, to safeguard public interest,  or the interest of the NBFC and other stakeholders. 
  • This is generally undertaken if the credit quality of the lending company has significantly worsened.

CARE places SIFL credit rating under watch

  • Srei Group had announced consolidation of the group’s lending business into Srei Equipment Finance Ltd (SEFL), through a slump exchange and was effective from 1  October 2019. However, the consent from all lenders of SIFL had not been obtained for the same.  According to media reports, a few lenders are expected to approach the National Company Law Appellate Tribunal (NCLAT) over SREI group’s move of consolidation, in potential breach of loan covenants. 
  • The NCLT on its order dated 21st October mentioned that creditors to the company will meet on 16th December and 23rd December.
  • CARE said that the ratings of SIFL continue to remain under credit watch with developing implications pending the outcome of the above-proposed meetings of creditors for considering the Scheme of Arrangement amidst stressed liquidity position.

CRISIL Downgrades pass-through certificates originated by SREI Equipment Finance

  • On 19th November CRISIL has downgraded three pass-through certificates issued by Srei Equipment Finance to  A- (SO) from A+ (SO). The rating remains on Rating Watch with Negative Implications.
  • The credit quality of SEFL has deteriorated sharply. The amount of loan book in SMA / Overdue category outstanding as on September 30, 2020, of all cases where moratorium benefit was extended stood at ₹12,282 crore, a worrying 42.5% of the total on-book loans of ₹28,965 crore.

INDmoney Analysis

SIFL has been under severe financial stress for the past few years. SIFL posted a 91% decline in profit for the September quarter. The management clearly indicated that the infrastructure sector has been under severe stress and it will take a long time to bring things back on track. There is a lot of uncertainty with regards to the proposed consolidation  of assets and the slump sale. Also, Srei Infrastructure Finance holds a 3.34% stake in Lakshmi Vilas Bank, which will get delisted from the exchanges and will be valued at zero. 

We recommend that you exit your investments in SREI group.

Finzoom Investment Advisors Private Limited (Brand Name - INDmoney, INDwealth,,, makes no warranties or representations, express or implied, on products and services offered through the platform. It accepts no liability for any damages or losses, however, caused in connection with the use of, or on the reliance of its advisory or related services.

Past performance is not indicative of future returns. Please consider your specific investment requirements, risk tolerance, goal, time frame, risk and reward balance and the cost associated with the investment before choosing a fund, or designing a portfolio that suits your needs. Performance and returns of any investment portfolio can neither be predicted nor guaranteed.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Marketing and distribution of various financial products such as loans and deposits are powered by Finzoomers Services Private Limited.

INDmoney, INDwealth, are brand and product of Finzoom Investment Advisors (P) Limited.

© Finzoom Investment Advisors Private Limited

[SEBI RIA Registration No: INA100012190] [Type of Registration: Non-Individual] [Validity of registration: December 17, 2018-Perpetual] [Address: 616, 6th Floor, Suncity Success Tower, Golf Course Extension Road, Sector – 65, Gurugram, Haryana- 122005] [Principal Officer details: Mr. Gaurav Sharma, Email id:, Contact No. 8800826254] [Corresponding SEBI local office address: Securities and Exchange Board of India, Local Office, First Floor, SCO 127-128, Sector 17C, Chandigarh-160017]

[ARN - 151913] [Platform Partner : BSE (Member code-24801)] [CIN - U67190HR2018PTC073294] [GST No : 06AADCF3538Q1Z8]