Pandemic and cash flow issues are main reasons for SREI group’s mess: Hemant Kanoria
The RBI acted even as proposals for Srei’s capital injection from many global investors, including that of Singapore Makara Capital (Rs 2,200 crore) and US-based Arena Investors (Rs 2,000 crore), were waiting with her.
Mumbai, India, January 31, 2022 /PRNewswire/ — These two must be about Rs 32,000 crores to the system: approx. Rs 18,000 crore to banks managed by Uco Bank (Rs 3,000 crore), SBI and Union Bank (Rs 2,000 crore each), Axis Bank etc., on Rs 10,000 crore in BCE and bonds and around Rs 4,000 crores to others.
Hemant Kanoria, the beleaguered businessman who pioneered infrastructure finance in the country in 1989, said the pandemic and resulting cash flow problems, coupled with his own seriousness in repaying lenders in s ‘legitimately going to court for debt restructuring, are the reasons. for the SREI Group mess currently.
Kanoria also said that if the Reserve Bank had given the SREI group more time to adapt to the new regulatory standards, which mainly suit banks and others NBFC not an infra finance company, which started after the fall of IL&FS, and accepted that their business was not typical of other retail/housing NBFCs, the group would not have ended up the way it l did now.
“But I have no regrets, instead I’m happy to have pioneered infrastructure finance in this part of the world and managed it successfully for more than three decades – from what was a Rs 150 crore industry when we started Rs 50,000 crore industry now,” Kanoria told PTI, when the Reserve Bank replaced the boards Srei Infrastructure Funding and Srei Equipment Finance and sent them to NCLT Kolkata for bankruptcy resolution later in the week.
the RBI even acted as SREI capital injection proposals from many global investors including that of Singapore Makara Capital (Rs 2,200 crore) and US-based Arena Investors (Rs 2,000 crore), were waiting with her.
“The only reason for our January 2021 the decision to have a debt recast proposal approved by the NCLT was to ensure that we repaid our lenders in full after discovering cash flow problems since the pandemic; in fact, our problem started after IL&FS went bankrupt in October 2018. The problem arose because the RBI allowed our borrowers to avail of the moratorium but did not allow the banks to offer a moratorium to their NBFC borrowers,” Kanoria said.
“In fact, by going to the NCLT with a 10-year repayment schedule under the provisions of Section 230 of the Companies Act 2013, and not under the IBC, we anticipated a default. But instead, we are now in the IBC,” he said.
But ironically, UCO Bank-led lenders rejected the NCLT-approved debt restructuring proposal, saying SREI was not a defaulter and “even today I don’t understand why we were denied a moratorium,” he said.
“If the president of UCO Bank at the time (Atoul Goyal) didn’t take our coming to NCLT as a personal affront, I’m sure none of us would have been in the mess we find ourselves in today,” Kanoria said, adding that they had no intention of challenging the IBC resolution as it progresses in any higher legal forum.
In fact, SREI and the entire NBFC universe began to feel the ground beneath their feet crumble when IL&FS collapsed in October 2018. Another problem started when the RBI changed its guidelines and wanted NBFCs to comply with established policies for banks, in a very short time, he said, adding that he had personally written to the regulator to treat infra funding NBFCs differently, because in infrastructure financing, it is the operator who is in difficulty and not the assets it operates because an “asset cannot simply be in default but the operator”.
And the final highlight was the pandemic hitting their cash flow as their borrowers were granted a moratorium but not extended to NBFCs leading to the eventual cash flow mismatch.
On its alternative investment fund joint venture Trinity, in which SREI owns 51% and the remainder with Payaash Capital of SingaporeKanoria said Trinity is a pureplay fund manager with various schemes including a stressed asset fund among other funds and invests through structured finance and reimburses its investors.
On the resolution professional appointed by the RBI (EY’s Abizer Diwanji) seeking to take control of the fund, he said it does not make sense because the PR on the one hand wants to take control of the AIF which has about Rs 8,500 crores of assets, but at the same time does not want to accept the claims of some of its investees. This is nothing but reverse logic, Kanoria said.
Regarding the alleged related party loans between the SREI entities and the beneficiary companies of Trinity, he said, the same was disclosed in the 2021 annual report by the auditors after the RBI asked us to do.
Warning that the days of NBFC infrastructure financing are over in the country – SREI being the last of three since IL&FS went bankrupt and IDFC merged with its banking subsidiary – Kanoria said he doesn’t even see NBFCs operate beyond the next five years as it seems the RBI does not want NBFCs at all but wants they become banks.
Kanoria, however, declined to talk about his other companies that are in power (power of india), real estate and hospitality (the city’s Westin Hotel is owned by them) and rural infrastructure and housing arms, saying they are all managed by their boards of directors.
About SREI Group
All these years, SREI NBFC twins – SREI Infrastructure Finance Ltd and SREI Equipment Finance Ltd. have been a pioneering force in the financing of infrastructure and equipment in India. He has practically remained the “last man standing” among the private players in the financing of infrastructure in the country. These two companies have invested in energy projects, roads, airports, ports, health care, townships, etc. despite several challenges over the past three decades.
He helped create infrastructure assets that will serve our country for generations. When she embarked on this journey, she opted for a path less traveled, because financing infrastructure is one of the most difficult tasks in India with its highly regulated environment and high cost of funding. With hard work and effort, SREI has become synonymous with infrastructure and has become the face of the private sector in infrastructure finance and the undisputed market leader in infrastructure equipment finance in India.
SOURCE SREI Group