The first meeting of the creditors’ committee will be held on Tuesday
The first meeting of the Creditors Committee (CoC) of Srei Equipment Finance Ltd (SEFL) is scheduled to be held on November 2 at the Marriott in Kolkata under Regulation 19 of the Insolvency and Bankruptcy (IBC) Rules 2019.
The CoC should discuss and update the Corporate Insolvency Resolution Process (CIRP) and its timelines, the claims status and composition of the CoC, the cash flow statement, the expenditure budget and the way forward on how the resolution process works.
As Trustee of the Debentures, Axis Trustee Services Ltd will attend the Meeting on behalf of the Debentureholders. Meeting minutes and voting process will be uploaded after the meeting and will be communicated via email. Bondholders are not required to attend the meeting.
Axis Trustee Services, the debenture trustee for various listed secured and unsecured NCDs (non-convertible debentures) issued by the Srei group, wrote a letter to the holders of NCDs with the details. NCD holders can write to Axis Trustee Services at their dedicated email address [email protected] or reach them on their WhatsApp number 8104889519.
Previously, the NCDs issued by Srei Infrastructure Finance Ltd (SIFL) had been transferred to SEFL via a slump sale approved by the ESB on February 26, 2020.
While Axis Trustee Services has adopted a proactive attitude in communication with investors From the start of the year, Catalyst Trusteeship is at the opposite end of the spectrum, with no communication with investors and a severely clogged email id, which returns all emails sent. Debenture trustees play a crucial role in representing debenture holders, protecting their interests and communicating effectively with investors.
Catalyst Trusteeship has shown very little interest and a complete lack of communication throughout DHFL’s IBC proceedings, angry investors have said. The same is also happening in the case of DS Kulkarni Developers (DSK). This makes ridiculous Catalyst’s claims that “improved communication speed in default of obligations is faster.”
The special audit conducted by RBI from December 2020 to January 2021 observed that the funds disbursed to certain borrowers were received from these borrowers or from companies in their group on the same date or on dates close to the disbursement date. which indicates a renewal.
In April of this year, Srei appointed public accountants KPMG Assurance and Consulting Services LLP and DMKH & Co to perform a forensic audit as part of its debt realignment project. Srei’s consolidated borrowings as of September 30, 2020 amounted to Rs 30,000 crore.
Banks are preparing to classify loans worth Rs 35,000 crore made to the Srei group as non-performing assets (NPA) in the September quarter.
This is the second instance after DHFL, where an NBFC (non-bank financial company) has been dismissed for insolvency on the instruction of the banking regulator.
Experts pointed out that Srei’s companies own infrastructure assets compared to DHFL, which had mortgage borrowers, branches and an excellent geographic presence. Even then, DHFL lenders had to agree to a haircut of around 65%. DHFL had more retail loans while the Srei Group has more lump sum infrastructure loans (similar to what is seen in the case of IL & FS) – for example, loans for road and power projects.
While Piramal was interested in purchasing DHFL’s retail home loan portfolio (which became attractive even as interest rates fell and the property market appeared to recover after a long period of distress), he will be probably difficult to find a buyer for infrastructure assets and the Srei Group is a complex and tangled web of holding companies, subsidiaries, funds, asset management companies (AMCs) and trusts.
The Kanoria Foundation is at the top and has four wholly owned holding companies – Aksara Commercial, Adisri Commercial, Adishakti Commercial & Vara Technology – through which it owns its network of nearly 50 companies. SIFL has loaned to a few companies in which Kanoria Holding has an indirect or even direct stake. For example, it has loaned to Shrishti Infra, which Adishakti Commercial owns, while SIFL itself is owned by Adishakti Commercial. Numerous transactions of this type can be observed in the group, which led RBI to order an audit at the beginning of the year.
The Kanoria Foundation has also started trusts which, in turn, have invested in certain businesses. For example, IPCL, a company owned by Aksara Commercial, transferred its investment division to Power Trust. We do not know who the beneficiaries of this trust are. However, since it was formed from assets held by a subsidiary of Kanoria, it is possible that the Kanoria Foundation and / or the Srei group are beneficiaries, or even the largest beneficiary of the trust. Bankers believe that SIFL has loaned out certain companies owned by the Trust which appear to be linked loans.
The Kanoria Foundation has also launched funds such as Srei Alternate Investment Trust and Srei Multiple Asset Investment Trust, which own companies to which SIFL and SEFL have loaned.
Loans to certain group companies have been granted at attractive long-term rates -1% for the first five years, with pooled interest for a yield of 12% from the 5th to the 8th year.
The two Srei companies do not accept deposits in NBFC; therefore, unlike the case of DHFL, investors have only invested in MNTs and no funds are locked in company deposits.
Many of these investors (mostly older people) invested in bonds in the hope of getting better returns on their investment since the Srei Group was offering up to 11.75% interest per annum (as well as an additional 0.25% for shareholders, existing bondholders and seniors), at any given time.