Banks are likely to recover close to 45 per cent of their claims from the Srei group resolution after lenders voted to sell the company to the National Asset Reconstruction Company Ltd (NARCL). According to sources, the gross amount payable by NARCL is close to Rs 15,000 crore, as against the admitted claim of Rs 32,750 crore.
On Tuesday, NARCL — in which public sector banks have a majority stake — edged out Authum Investment and Arena-Varde to acquire Srei groups with 89 per cent of creditors voting for.
The total value of resolution involves upfront cash payout and deferred payments by way of instruments such as optionally convertible debentures.
Sources said NARCL will pay banks over Rs 3,000 crore in cash and another Rs 3,500 crore in yearly instalments over five years. The remaining amount, which is close to Rs 8,000 crore, are optionally convertible debentures that will be paid to banks based on recovery, bankers said.
Bankers said the realisation from the Srei resolution is expected to be higher than the average recovery under the Insolvency & bankruptcy Code (IBC). According to the latest RBI data for 2021-22, the recovery rate under the IBC stood at 23.8 per cent, while the rates under SARFAESI Act and debt recovery tribunals (DRTs) stood at 25.7 per cent and 22.5 per cent, respectively.
Banks expect to recover the cash amount during the first quarter of the next financial year.
Financial lenders include State Bank of India, Canara Bank, Punjab National Bank, Bank of Baroda, Indian Bank, Union Bank of India, IDBI Bank, UCO Bank, and Indian Overseas Bank.
The Reserve Bank of India- (RBI)-appointed administration of the Srei groups will now apply to the regulator to obtain fit and proper approval. National Company Law Tribunal’s (NCLT’s) approval will be sought after receiving regulatory clearance. “The RBI’s approval for NARCL is expected by the end of the month,” said a bank official.
In October 2021, the RBI superseded the boards of Srei Infrastructure Finance and Srei Equipment Finance for insolvency proceedings due to governance concerns and payment defaults by them. It also appointed Rajneesh Sharma, former chief general manager, Bank of Baroda, as the administrator of Srei companies.
This is the second resolution for a finance company under the Insolvency and Bankruptcy Code (IBC). Earlier, the troubled mortgage lender Dewan Housing Finance Corporation (DHFL) went through a similar resolution process in FY22. Piramal Enterprises acquired DHFL by paying a consideration of over Rs 34,000 crore.
Erstwhile promoters of Srei group had submitted a resolution plan under Section 12A of the Insolvency and Bankruptcy Code (IBC).
SETTLING THE DUES
Bankers said the realisation from the Srei resolution was expected to be higher than
the average recovery under the IBC
NARCL edged out Authum Investment and Arena-Varde to acquire Srei group firms
NARCL offered a combination of cash, OCD
Sources said NARCL will pay the banks cash of over ~3,000 crore and another ~3,500 crore in yearly instalments over 5 years
This is the second resolution for a finance company under the Insolvency and Bankruptcy Code
After the RBI nod, NCLT’s approval will be sought
Banks expect to recover the cash amount during the first quarter of the next financial year
Source: Business Standard, dated 16/02/2023
