The National Company Law Tribunal (NCLT) on Friday allowed insolvency petitions banking Sector regulator RBI against two Serei Group firms and appointed an administrator to run the companies.
The move comes after the Bombay High Court on October 7 dismissed Srei Group’s plea against RBI’s action on Srei Infrastructure Finance Ltd (SIFL) and Srei Equipment Finance Ltd (SEFL).
“Lenders want a DHFL type resolution where there is an opportunity for strategic global investors or domestic investors to buy assets at a good price,” said Deepak Jasani, Head of Retail Research, HDFC Securities.
He said banks are preparing to classify Rs 35,000-crore loans made in the September quarter to Shrey Group as non-performing assets (NPA) after an appellate tribunal has cleared the hurdles in this regard. , a possible deduction of 50-60 per cent may be acceptable to them (the time and amount of recovery is guaranteed under this resolution process).
Srei companies have better infrastructure assets than DHFL, had home loan borrowers, branches and good geographical presence. Even then DHFL’s lenders had to accept a haircut of around 65 per cent, Jasani said.
Expressing similar opinion, L Badri Narayan, executive partner of Lakshmikumaran and Sreedharan Attorneys, said, “The regulator has taken these steps in the right direction to protect the interests of the stakeholders and avoid the domino effect in the system.”
He further said that the success of the resolution process in DHFL is a sign of relief for the sector and the regulator.
“The role of RBI in monitoring and monitoring corporate governance in the regular operations of financial services companies and other regulators will be interesting,” Narayan said.
This will be the second instance after Dewan Housing Finance Corporation Limited (DHFL) where NBFCs will be sent for bankruptcy on the directions of the banking regulator.
Commenting on the matter, Ashit Shah, Partner, J Sagar Associates said that this decision of RBI comes on the heels of successful resolution process of DHFL.
Srei Group mainly deals in MSME and infrastructure sector.
In November, 2019, the Reserve Bank superseded the Board of Directors of DHFL due to governance concerns and defaults by DHFL in meeting various payment obligations. It was the first finance company to be referred to NCLT by RBI, exercising special powers under section 227 of IBC.
The RBI had referred DHFL – the third largest pure-play mortgage lender at the time – for resolution under the code. It was the first finance company to be referred to NCLT by RBI, exercising special powers under section 227 of IBC.
DHFL had gone bankrupt with loans of over Rs 90,000 crore from various lenders including banks, mutual funds and individual investors holding fixed deposits with the company.