SREI Infra Latest News Updates: Debt woes, top management resignations and more

SREI Infra Latest News Updates: Debt woes, top management resignations and more

Last updated: 23 Sep, 2021 | 03:23 pm

SREI Infra Latest News Updates: Debt woes, top management resignations and more

From various top level resignations to debt woes, a lot has happened in SREI infra over the last few days. Here are some important highlights:

Srei Infra latest news: Debt situation at SREI Infra

  • SREI Infra has total liabilities outstanding to the tune of Rs 28,000 crore, which includes Rs 18,000 crore of bank loans and another Rs 10,000 crore of external commercial borrowings and bonds. 
  • Earlier this month, the National Company Law Appellate Tribunal (NCLAT) has set aside an earlier order which prevented banks from classifying the outstanding dues of Srei Infra and Srei Equipment Finance as NPAs, till a scheme of arrangement was agreed upon and signed by all creditors. 
  • Following this, banks are reportedly preparing to classify these outstanding loans worth Rs 28,000 crore made to Srei group as non-performing assets (NPA) in the September quarter, according to media reports. However, in a clarification to the exchanges on Sep 16th, SREI Group said that  Srei Infrastructure Finance Limited has no information from its bankers regarding classification of loans availed by Srei Group as NPAs. Therefore, the Company cannot make disclosures merely on the basis of “hearsay news.”
  • According to estimates by analysts, public sector banks Indian Bank and Canara Bank have exposures of ₹2,000 crore and ₹1,200 crore, respectively, while Axis Bank has an exposure of ₹800 crore. 
  • In March-21, CARE had downgraded debt of Srei Infrastructure Finance due to continued delays in servicing debt obligations. 
  • In the latest quarter, the company’s net loss widened to Rs 971 crore as compared to a profit of Rs 23 crore in the previous year. The Operating Profit fell by 87% in the Apr-Jun 21 period to Rs 132 crore.

CEO and other top level executives have resigned

  • Over the last few months, the company has seen many top level exits, including the CEO
  • Last week, CEO Rakesh Kumar Bhutoria resigned due to the issue of salary arrears. The lenders of SREI Infra have taken control of the company’s finances to recover their dues. This has led to mass level exits at Srei Group, as salary delays became a routine, and remunerations of the top-level executives were capped at ₹50 lakh per annum. 
  • These top-level employees are now exploring the option of taking legal recourse for release of their salary arrears, which has been held by banks controlling the TRA (Trust and Retention Account)
  • In March this year, Sandeep Kumar Lakhotia resigned from the position of company secretary and compliance officer. The chief operating officer (COO) of the company's fully-owned subsidiary Srei Equipment Finance Ltd (SEFL) had left in April.
  • More recently, Mr. Ram Krishna Agarwal stepped down from the position of Independent Director of the Company with effect from 17th September, 2021 due to his pre-occupations with various professional and social commitments. 
  • The Head of Treasury and Head of Corporate Communications have also left, according to media reports. Around 250 employees of the Srei group have resigned since December 2020.

Future of Srei Infra: Outlook going forward

  • Srei Group continues to remain in discussion with its lenders for restructuring of the loans. In July, the group had received term sheets from Singapore's Makara Capital Partners for an investment of Rs 2,200 crore, and from US-based Arena Investors for investment of Rs 2,000 crore. On Sep. 10, the group also sold one of its subsidiaries, Trinity Alternative Investment Managers Ltd. for Rs 1.32 crore. However, these are miniscule in comparison to the outstanding debt. 
  • The group’s net worth is in the negative territory. Further, the company was unable to comply with various regulatory ratios/limits. 
  • While the larger market remains skeptical about the company’s ability to repay its dues, SREI said that it is confident of reaching a resolution with its lenders. SREI said that it believes it will be able to repay all its creditors over a period of time if the debt is restructured in line with cash flows.

INDmoney Recommendation

  • Since November last year, INDmoney has been advising its investors to exit their investments to the SREI Group. A reminder was sent every time there was a downgrade of the group’s debt profile.
  • Given the latest developments with respect to the company’s debt profile as well as top level exits in the firm, we reiterate that you exit your holdings to the SREI Group. 
  • The company's already stressed balance sheet has further impacted its ability to repay dues. In case the debt turns bad, the NAV of your debt funds could take a hit. Hence, it is prudent to sell off your holdings in this entity. 
  • Srei Infrastructure shares closed at Rs 2% lower at Rs 8.55 on Thursday.