However, Srei Group said it expects banks to prepare a debt restructuring plan that will map repayment milestones to future cash flows.
Since the group entities involved are non-banking financial companies (NBFC), the lenders concerned mandatorily require the Reserve Bank India‘s (reserve Bank of India) Approval to take Shreya Group to the National Company Law Tribunal (NCLT) for insolvency proceedings.
Responding to a query by ET, Srei Group spokesperson said that the economic slowdown and the moratorium provided by the regulator have affected operations. The group is now in discussions with banks to implement the restructuring plan.
‘There will be an impact on the NPA ratio’
“We expect the banks to take a decision on restructuring the debt at the earliest so that the company can pay all its bondholders and other creditors,” a Srei spokesperson said in an emailed reply to ET. “We are very hopeful that the banks will propose a payment schedule commensurate with the cash flows of the company which will enable paying all the creditors and help the company run smoothly.”
To be sure, Srei Infrastructure Finance could become the next big bankruptcy candidate in the financial services sector after Dewan Housing Finance (DHFL). Banks are free to classify credit group loans as NPAs after the National Company Law Appellate Tribunal (NCLAT) earlier this month lifted the moratorium on marking such exposures as bad, a lower bench order separating.
- Shrey Infra and its arm Shreya Equipment Finance owe Rs 30,000 crore to lenders and debenture holders
- UCO Bank, SBI have over Rs 2,000 crore investment each
- Shrey Infra posted a loss of Rs 971 crore in the June quarter
- Provision on loan increased to Rs 439 crore from Rs 67 crore a year ago
- In July, Srei disclosed that an RBI-directed audit had given loans of Rs 8,576 crore to ‘potential’ related parties of the group.
“This quarter, all banks will have to classify the loans given to Srei as NPA and make necessary minimum provisions,” said a person familiar with the banking sector’s exposure at Srei Group. “Many banks have additional provisions, therefore, this should not be a cause for concern. But with such a large loan account slipping, the gross NPA ratio of some banks will increase at the end of the quarter.”
Srei Infrastructure, and its subsidiary Srei Equipment Finance, together owe a total of Rs 30,000 crore to lenders and debenture holders. Kolkata-based UCO Bank is the leading lender with an exposure of over Rs 2,000 crore. State Bank of India (SBI)’s investment in the group is also over Rs 2,000 crore.
Bankers say they have already set the ball rolling for recovery of loans by writing to the RBI and a regulatory nod to take the company through bankruptcy courts could mean another DHFL-type insolvency process .
A second person aware of the banking sector exposure related to Srei said, “Two letters have already been sent to the RBI apprising the conditions. If the central bank allows, the banks will proceed with the court-monitored process.” ” “It remains to be seen what the central bank’s response is.”