Srei insolvency: NARCL wins bid for stressed twin NBFCs

Srei Infrastructure Finance Ltd and Srei Equipment Finance Ltd are undergoing insolvency proceedings

The government-backed National Asset Reconstruction Company Ltd (NARCL) won the bid for Srei group's two companies -- Srei Infrastructure Finance Ltd and Srei Equipment Finance Ltd -- undergoing insolvency proceedings, an official said.

The Committee of Creditors on Wednesday approved the plan submitted by NARCL, which offered a Net Present Value (NPV) bid of Rs 5,555 crore, after it received the highest vote of 89.2 per cent from verified creditors.

Authum Investment and Infrastructure with a bid of Rs 5,526 crore received the second-highest vote with 84.86 per cent while the consortium of Varde Partners and Arena Investors, which had submitted a financial bid of approximately Rs 4,680 crore, bagged the third position with around nine per cent vote, the official said.

After the completion of the challenge mechanism process, the Srei companies had received these three bids.

The Reserve Bank of India superseded the boards of Srei Infrastructure Finance Ltd and Srei Equipment Finance Ltd in October 2021 due to governance concerns and repayment defaults. The regulator applied with the NCLT Kolkata to initiate the insolvency proceedings against the twin.

A letter of intent will be issued to NARCL. The Srei administrator will send the NARCL plan to RBI for approval and also submit the results before NCLT by February 18, the official said.

NARCL's total value of the plan stood at Rs 14,301 crore which includes a cash component of Rs 3,001 crore, debentures and security receipts worth Rs 3,300 crore, and an uncommitted payment of Rs 8,000 crore. These uncommitted payments are conditional and subject to recovery from underlying assets over the next seven years.

Creditors had taken a haircut of 55 per cent considering a full recovery of the uncommitted value of Rs 8,000 crore.

The bankers considered NPV to arrive at the highest bidder during the challenge mechanism--which is a method for seeking the highest bid for an asset.

This is the second case of NBFC from RBI monitored action after Dewan Housing Finance Corporation and Piramal Capital have taken over in the insolvency process in 2022.

The erstwhile promoters had made a last-ditch offer last week to the administrator under section 12A of the Insolvency and Bankruptcy Code (IBC) to pay off dues of around Rs 32,000 crore to creditors to withdraw their companies from the ongoing insolvency process, but it was not accepted on technical grounds.

The total admitted claims of the financial creditors of the two NBFCs are Rs 32,750.22 crore.