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EXCLUSIVE| Srei Group's lenders lift salary cap of top executives, may pay arrears soon

On March 17, Moneycontrol first reported about the lenders move to cap the top executive salaries.

May 04, 2021 / 04:12 PM IST

In a major relief to Kolkata-based Srei Group, lenders have lifted the salary cap earlier imposed on the company's senior level executives with effect from April 1 . Following this, all employees have received their full salaries for the month of April. Lenders are also engaged in discussions with Srei management to pay the arrears of last five months to employees, according to sources familiar with the development.
Lenders had capped the salaries of Srei top deck in December at Rs 50 lakh per annum in a desperate effort to recover their dues. The salary caps, effected from December,  caused disquiet in the rank and file of Srei, a non-banking finance company (NBFC) that is facing a severe financial crunch, and led to exits of several employees.

Around 200 senior level staff had quit post this which include at least a dozen from the senior management level. The exits include the company secretary of Srei Infrastructure Finance, Sandeep Kumar Lakhotia. The salary caps had impacted Srei's operations and its efforts to collect dues from its customers. In addition to salary caps, lenders didn't allow any payments without their prior approval, which resulted in delays statutory and other payments.

Responding to email queries, a Srei spokesperson confirmed the developments. "We confirm that the salary cap, which was earlier imposed by lenders, has been lifted with effect from April 1, 2021. We are engaged in discussions with our lenders and expect that the arrears will be paid soon," the spokesperson said. None of the lenders contacted by Moneycontrol for this story were willing to comment on this development.

On March 17, Moneycontrol first reported about the lenders move to cap the top executive salaries. Post the Moneycontrol story, a few lenders had reached out to the Srei management seeking details about the recent senior-level exists. Lenders have also hinted at their willingness to review some of the decisions taken to facilitate recovery. Srei owes around Rs 18,000 crore to around 15 lenders including Axis Bank, Uco Bank and SBI. According to Srei, its finances took a hit due to COVID-19 and it has secured a moratorium from the Kolkata branch of bankruptcy court National Company Law Tribunal (NCLT).

The Kolkata-based NBFC, which has assets worth around Rs 43,000 crore, faced significant stress due to COVID-19. It faced difficulties in recovering money from businesses—that were hit hard by a slump in business due to the pandemic—it lent money to and, consequently impacted its repayments to its own lenders. Around 60 percent of businesses that borrowed money from Srei have approached the company to restructure the loans due to financial stress caused by the pandemic.

Talks with investors

In the recent past, investors have expressed interest in the group. The discussions with investors are ongoing and are in advanced stages, the source quoted above said. On 24 April, Srei Equipment Finance said it has received an expression of interest(EOI) for capital infusion from Cerberus Global Investments B.V. SEFL has also received EoIs for capital infusion of about $250 million from US-based multi-strategy investment firm Arena Investors LP and Singapore-based global financial services company Makara Capital Partners, the company said.
"SEFL has proceeded with discussions with both Arena Investors and Makara Capital and the company's Strategic Coordination Committee chaired by Independent Director Mr. Malay Mukherjee, is currently engaged in discussions with the private equity funds to bring capital into the business," the company said.

Cerberus is headquartered in New York City, USA, and has advisory offices in Mumbai, Tokyo, Hong Kong, Singapore, Beijing, London, Dublin, Dubai, Madrid and Frankfurt, among others. Established in 1992, Cerberus comprises one of the world's leading private investment firms with approximately $53 billion under management across multiple strategies.

Dinesh Unnikrishnan
first published: May 4, 2021 04:12 pm

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