In Retrospect, Shouldn’t Have Gone To Court: SREI Promoter Hemant Kanoria
SREI promoter says retail bondholders' plight is the "saddest moment" of his life.
A day after the Reserve Bank of India superseded the boards of SREI Group non-bank lenders, Hemant Kanoria said the promoters shouldn’t have tried to get a court order against banks.
“I think that was a wrong move on our side in retrospect because the bankers got irritated, asking why did we move the court. It was done with the right intention to pay to everyone,” Kanoria, former chairman at Srei Infrastructure Finance Ltd., told BloombergQuint in an interview.
To recap, the Kolkata bench of the National Company Law Tribunal in December 2020 had prohibited banks from taking any coercive action or downgrading SREI Group companies for non-payment of dues. The order was passed in response to a scheme of arrangement filed by the group, which sought to repay dues of various classes of creditors over years.
SREI Group’s lending businesses had suffered serious liquidity issues after the apex bank allowed lenders to defer dues of borrowers owing to the Covid-19 pandemic. While the group’s borrowers got the benefit of deferred payments, it could not defer its own repayments to lenders, creating a cash-flow mismatch.
The scheme of arrangement was eventually rejected by the lenders, who then approached the RBI for insolvency proceedings against the two companies. The central bank on Oct. 4, 2021 superseded the boards of Srei Infrastructure Finance Ltd. and Srei Equipment Finance Ltd. with immediate effect as it intends to proceed with an insolvency petition against the two firms. It has appointed Rajneesh Sharma, former chief general manager from Bank of Baroda, as the administrator for both companies.
“We thought it was a very benign thing because the order also said that if the scheme was not accepted by the creditors it could be modified. We thought it was open-ended and if the creditors do not accept what we had proposed, they will change it,” Kanoria said recalling the scheme of arrangement presented earlier.
Currently, SREI non-bank lenders owe domestic banks, bondholders, external commercial borrowing lenders and other foreign lenders nearly Rs 30,000 crore. As of now, retail bondholders have dues worth Rs 1,500 crore pending repayment.
“We are very, very sad” about the deferment of payment to retail non-convertible debenture holders since October 2020, Kanoria said. “We have been trying to convince the bankers time to time to please allow us to pay the bondholders because these are small amounts.”
According to the SREI Group promoter, there are about Rs 400 crore in funds lying in the current accounts as on Sept. 30, which could have been used to repay bondholders. He has requested banks and the RBI-appointed administrator to repay retail bondholders at the earliest, he said.
“I hope there was some way we could have done it. That is my biggest, saddest part. Even if I had been able to bring in capital, it would not be possible because it would have come into the bank account and it would be at the decision of the bankers,” Kanoria said.
This is the second instance of a non-bank finance company being referred to insolvency resolution at the banking regulator’s directions. In November 2019, Dewan Housing Finance Corp. was referred for bankruptcy proceedings. That case was finally resolved last month.
Watch BloombergQuint’s Vishwanath Nair’s conversation with Hemant Kanoria here: