The mandate is being sought on the basis of internal assessment by the lenders
Officials said the promoters – the Kanoria brothers – allegedly diverted money borrowed from banks to invest in equity in subsidiaries.
The administrator will seek this mandate from the lenders in the next first creditors committee (CoC) meeting is to be held in the first week of November. People said that these proposals were discussed in an informal meeting organized by the Administrator on 19 October.
For example, Bharat Road Network, a subsidiary of Srei Equipment, has seven special purpose vehicles (SPVs) to strengthen expressways, of which two SPVs have been sold, but the lender can use the remaining ones, A banker present in the meeting said. . Similarly, Srei has business interests in the energy and hospitality sectors, so lenders may be able to access the cash flows of these units as well.
Some lenders have questioned the viability of administrators having control over the cash of subsidiaries not only because they are run by different boards but also because they may have different lenders. A leader present in the meeting said the move could lead to litigation and further delay in resolution. One of the lenders’ suggestions was to appoint a director on the boards of subsidiaries of Shrey Infrastructure and Shrey Equipment to oversee their operations.
During the same meeting, Sharma also sought the consent of the lenders to propose a resolution in the first CoC on appointing EY as financial advisor to the administrator.
The first person said that at least two large commercial banks objected to EY’s proposal to become financial advisor over concerns of “conflict of interest”. Before he admitted to the corporate insolvency and resolution process on October 8, EY was advising the promoters of Shrere, the Kanoria brothers, on debt restructuring, said one of the two persons cited above.
The administrator indicated to the lenders that the EY was conducive to the experience gained in resolution of DHFL – the first financial entity accepted for resolution under the Insolvency and Bankruptcy Code (IBC).
EY was one of six consultants, including Alvarez & Marsal and KPMG, made a pitch to lenders for the role of financial advisor on 16 October.
Besides this, Sharma also discussed the possibility of restarting the lending business of both the credit companies, the first person said.
NS Srei Administrator And EY did not respond to a request for comments.
KPMG, which is conducting forensic audit of both the Srei companies, is yet to submit its reports to the lenders. In the middle of this calendar year, Srei Infrastructure disclosed that a Reserve Bank of India report had identified loans of Rs 8,576 crore as related party transactions and asked Srei Infrastructure to “reevaluate the relationship with the said parties”. It is directed to assess whether they are related parties to the parent firm or Shrey Equipment Finance Limited and also whether these are at an arm’s length basis.”