Srei Creditors Weigh Extending Bid Deadline As Interest Wanes

Investor interest in Srei Group's two non-bank finance companies undergoing insolvency proceedings has waned, prompting lenders to mull an extension of the bid deadlines.

Of the 13 potential resolution applicants which had submitted expressions of interest for Srei Infrastructure Finance Ltd. and Srei Equipment Finance Ltd., only four or five investors remain interested and are actively working on putting together a bid, according to two people in the know who spoke on the condition of anonymity.

These bidders have sought more time from the creditors, who are currently discussing whether they should extend the deadline to June 7. It has already been extended once from April 26 to May 17.

The creditors will need to put the proposal to vote and the extended deadline will be communicated to the bidders soon, the people said.

Investors including JM Financial Asset Reconstruction Ltd., Assets Care & Reconstruction Enterprise Ltd., Asset Reconstruction Company of India Ltd. and Edelweiss Group are working on their final bids, the people quoted above said.

Queries emailed to all four ARCs, Srei administrator Rajneesh Sharma and State Bank of India on Monday didn't elicit a response.

While the Reserve Bank of India is against allowing asset reconstruction companies to bid for companies under the insolvency process, these bidders may consider forming a consortium with others, the first of the two people quoted above said.

Most of the potential investors who had shown initial interest have dropped off from the bidding process after taking a look at the quality of the portfolio at the two NBFCs, said the person quoted above. Considering the time which has passed since borrowers of Srei Group NBFCs have been in default, bidders feel that recovery procedures could remain strained, the person added.

Since the RBI had initiated insolvency proceedings against Srei Infrastructure Finance and Srei Equipment Finance in October 2021, lenders have found that nearly three-fourths of the combined loan book is classified as non-performing, BQ Prime earlier reported.

Loans worth Rs 9,911 crore were also extended to connected parties, according to an internal presentation last year. These are instances where Srei Infrastructure Finance has direct or indirect control over the borrower who has received loans from the two NBFCs.

Moreover, last month, Punjab & Sind Bank classified loans worth Rs 510 crore extended to Srei Infrastructure Finance and Rs 724 crore extended to Srei Equipment Finance as fraud. Smaller creditor Karnataka Bank also classified its Rs 12.81 crore exposure to Srei Equipment Finance as fraud on May 10.

Bidders who were initially interested included Vedanta Ltd., Jindal Power Ltd., Arena Investors, Riddhi Siddhi Gluco Biols Ltd. and the Welspun Group, according to details available on the Srei Infrastructure Finance website.

If no bids are received by the updated deadline, financial creditors may have to restart the insolvency proceedings from scratch, which could delay resolution. However, according to the first person quoted above, creditors are confident of finding a suitable resolution plan.

The resolution process at Srei Group NBFCs has been ongoing since December 2020, much before the regulator initiated insolvency proceedings. The Srei Group had previously proposed to invite investments in Srei Equipment Finance from international private equity investors. However, the plan did not materialise. In October 2021, the two group companies were referred to insolvency resolution.

Financial creditors have claims worth Rs 10,727.5 crore against Srei Infrastructure Finance and Rs 31,867.8 crore against Srei Equipment Finance.