The Kolkata bench of the national company law tribunal (NCLT) has approved the Rs14,867.50 crore resolution plan submitted by state-backed National Asset Reconstruction Company (NARCL) for SREI Equipment Finance Ltd (SEFL) and SREI Infrastructure Finance Ltd (SIFL), which are under the corporate insolvency resolution process (CIRP). This is the first acquisition by the government-owned NARCL. The resolution plan of NARCL was approved in February by the committee of creditors (CoC) of these two companies from the SREI group.
As part of the approved resolution plan, optionally convertible debentures (OCDs) with a face value of Rs8,000 crore would be issued to approving financial creditors (AFC). The terms of these OCDs, amongst other things, provide for conversion of the OCDs at the option of the holders from the beginning of the sixth year till maturity or eight years from the date of issuance of OCDs.
Further, as part of the approved resolution plan, compulsory convertible preference shares (CCPS) with a face value of up to Rs17,000 crore would be issued to AFCs. The terms of the CCPS, amongst other things, provide for conversion of the CCPS at the end of the tenure or eight years from the date of subscription of CCPS.
Besides NARCL, a consortium consisting of Varde Partners and Arena Investors and Authum Investment & Infrastructure participated in the bidding process for SEFL and SIFL. NARCL offered Rs5,555 crore in net present value (NPV) terms, including upfront cash of Rs3,180 crore.
Including cash and a committed amount of more than Rs6,500 crore, NARCL's gross offer was for Rs14,867.50 crore, which was approved by nearly 90% voting shares of the consolidated CoC of SIFL and SEFL. The Rs5,526 crore resolution plan in NPV terms submitted by Authum Investment & Infrastructure received almost 85% votes. Varde Partners and Arena Investors consortium's plan of Rs4,680 crore in NPV terms, including Rs3,250 crore upfront cash, got just 9% votes.
Earlier, the request for proposal (RFP) was changed to resolve a dispute between lenders and the consortium of Varde Partners and Arena Investors about submitting unconditional earnest money deposits (EMDs). The consortium had provided conditional EMDs, which the lenders did not accept.
The bidding process for Srei Infrastructure Finance and Srei Equipment Finance has seen consistent delays, partly due to bidders seeking more time to submit formal bids.
SEFL, along with its promoter SIFL, is being run by an administrator, which is looking into the day-to-today affairs of the companies since October 2021.
After DHFL, SREI was the second financial services group that was referred by Reserve Bank of India (RBI) for an NCLT-driven resolution process, by superseding the boards of these two SREI companies in October 2021.
In November last year, SEFL reported alleged fraudulent transactions amounting to Rs13,110 crore, during the erstwhile management of the company, run by Hemant Kanoria and Sunil Kanoria.
In the unaudited financial results of the company for the quarter ending 30th September, BDO India LLP, the transaction auditor has pegged the alleged value of the fraudulent transactions at Rs13,110 crore.
