The lenders of SREI Infrastructure Finance Ltd. and SREI Equipment Finance Ltd. initiated the process of debt restructuring by engaging forensic auditors and discussing potential solutions to stress in group entities.
According to two people with direct knowledge of the developments, public sector-led lenders UCO Bank and State Bank of India are considering a few options to restructure SREI Infrastructure’s debt. A restructuring of dues payable by SREI Group companies cannot occur without some form of operational restructuring, the people quoted above said.
As of September 30, SREI Infrastructure’s consolidated borrowings stood at Rs 31,435 crore compared to Rs 33,108 crore a year ago. Bank borrowings contributed 59.49% of total borrowings, while non-convertible debentures constituted 13.27%.
One option being considered is to lodge all bad debts under SREI Infrastructure, while the standard rights held by SREI Equipment can be restructured, according to the people cited above.
Another option is to park all bad loans with a special purpose vehicle, which can issue long-term bonds to lenders against their dues. As the underlying dues of these bad debts are recovered over time, the bonds can be repaid by lenders at a later date, the people said. Meanwhile, the two companies can continue their normal business activities by servicing the good quality loans they have provided to borrowers, the sources said.
The banks are also considering an option to change ownership of the SREI group’s lending business, through an injection of fresh equity. This injection of equity has become essential since the net worth of SREI Infrastructure fell to Rs 180 crore after accumulated losses following the Covid-19 pandemic of around Rs 4,000 crore in September, said people.
The consolidated net worth of SREI Infrastructure, according to the latest presentation available to investors, stood at Rs 4,064 crore as of September 30, 2020. During the quarter ended December 31, SREI Infrastructure reported a consolidated net loss of Rs 3,811 crore compared to a net profit of Rs 60 crore a year ago. Total revenue fell 66% year-on-year to Rs 484.35 crore in the third quarter. Spending rose sharply, with the cost due to loan impairment reaching Rs 2,833 crore from Rs 26 crore a year ago.
