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Srei company secretary quits, more senior-level exits likely over next few weeks

Recently, the lenders to Srei had capped the salaries of senior executives and taken over control of finances in a desperate bid to recover their dues.

March 21, 2021 / 08:50 AM IST
 
 
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Kolkata-based Srei Infrastructure Finance on March 20 said Sandeep Kumar Lakhotia has resigned from the position of company secretary and compliance officer with immediate effect. Lakhotia’s exit is the latest in a series of senior-level exits from the company since December after the lenders capped the salaries of Srei’s senior executives and took control over the finances.

According to sources in the know, a few more senior-level exits are likely over the next few weeks from the Srei group. The sources quoted above attributed the top-level exists, including that of Lakhotia, to the lenders’ move to cap senior-level salaries at Rs 50 lakh per annum and impose stringent controls over the company’s cash flows and cash usage which have apparently resulted in all payment delays.

Srei's stock exchange communication didn’t specify the reason for the company secretary’s resignation. Lakhotia did not elaborate on the matter when Moneycontrol reached out to him. To an earlier email query, Srei did not offer a comment on the issue of executive exits.

“Over the next few weeks, few more top executives are likely to quit the company,” said one of the sources quoted earlier. On March 17, Moneycontrol reported about the lenders’ move to cap the employee salaries at Rs 50 lakh a year regardless of seniority and position, tightening the screws on the embattled Kolkata-based group in a desperate effort to recover their dues.

The salary caps, effected from December, has 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 more than ten senior-level exits, Moneycontrol reported. Since December, at least 200 employees out of Srei’s total workforce of 1,500 have quit the company.

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According to the source quoted above, post the Moneycontrol report on March 17, a few lenders have 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, sources said.

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).

“Pursuant to Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 ("Listing Regulations"), we wish to inform you that Mr. Sandeep Kumar Lakhotia (FCS 7671), Company Secretary of the Company has resigned from the position of Company Secretary & Compliance Officer of the Company and will be relieved w.e.f. close of working hours of 20th March, 2021,” Srei informed the exchanges on Saturday.

The company will shortly be appointing a new company secretary and compliance officer, it said. “In the interim,  Ekta Agarwal, Deputy Company Secretary (ACS 33860) of the Company shall be in charge of the compliance function,” the company said in the exchange notification.

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.

Srei received a favourable verdict from the NCLT in January, securing a reprieve in the form of a six-month moratorium on all loans. NCLT also gave permission to arrive at a mutually agreed repayment schedule with the lenders.

The Kolkata NCLT order further said creditors cannot classify Srei loans as bad until the order stands and asked raters not to revise the ratings during the said time period. Soon after, the raters and creditors moved the Delhi NCLAT challenging the Kolkata NCLAT order.

The NCLAT in Delhi stayed the Kolkata NCLT order with respect to rating actions on a petition moved by CARE rating agency. CARE and Acuite subsequently cut the rating of Srei Group. Another rating agency, Brickwork, put its rating action on hold, saying it would wait for the final order from the Delhi NCLAT.

The rating downgrades have put more pressure on the company. Srei told Moneycontrol in an email response on March 15 that legal actions were being evaluated against the raters’ decisions. To explain in simple terms, a rating downgrade of a firm to junk status is a signal to the investors from a rating agency to stay away from that company. Banks will also not extend further financial assistance to such a firm.

Rating agencies are in no mood to relent. They have indicated that the Delhi NCLAT order permits the rating action. The raters have cited the defaults on the payment obligations to its creditors and also taken into account the significant losses incurred by Srei as well as the recent business disruptions of the company.

CARE classified Srei Equipment Finance Ltd’s debt of Rs 17,411.96 crore and Srei Infrastructure Finance Ltd’s Rs 11,828.34 crore in the ‘CARE D’ category suggesting default. A day before that, Acuite rating agency downgraded Srei Equipment Finance, a group company, to junk rating (ACUITE D). It rated total facilities of Rs 3492.45 crore. Srei posted consolidated losses of Rs3,810 crore in the third quarter of the current fiscal on account of higher provisions. It had posted a net profit of Rs 60 crore in the year-ago period.

(Part of this story has earlier appeared on Moneycontrol. The copy is being updated in view of the latest developments)
Dinesh Unnikrishnan
first published: Mar 20, 2021 07:20 pm

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