ECONOMY

Srei Group’s Rescue Plan Hangs By A Thread—BQ Exclusive

Infrastructure financier Srei Group has received a resolution plan from U.S.-based Arena Investors to buy majority equity stake in Srei Equipment Finance Ltd., two people with direct knowledge of the matter said.

Out of at least seven investors who had expressed their interest in Srei Equipment Finance in June, only one bidder has submitted the bid so far. BloombergQuint had previously reported that investors including Makara Capital, Varde Partners, Ares SSG, Cerberus Capital, CarVal Investors and Charlestown Capital had submitted expressions of interest.

Arena Investors is seeking to infuse Rs 2,000 crore in Srei Equipment Finance, as part of the offer. The offer is subject to no adverse outcomes from the forensic audit underway at SREI Group’s lending businesses, the people cited earlier said on the condition of anonymity. Lenders led by State Bank of India are reviewing the offer.

In an emailed response to BloombergQuint, a spokesperson for Srei Group said 11 investors had submitted expressions of interest for investing in Srei Equipment Finance so far.

“At present, other investors, who had submitted EoIs, are in the process of gathering information to arrive at the non-binding term sheet stage. This process takes time since investors evaluate expected cash flows, business model, industry trends, security structures and many other relevant information,” the spokesperson said.

The equity infusion will help Srei Equipment Finance stabilise its finances, as its net worth is negative currently. The lending arms of the group, Srei Equipment Finance and Srei Infrastructure Finance Ltd., have been facing a severe cash crunch.

A forensic audit led by KPMG was initiated by the lenders to Srei Group companies, as part of the restructuring. While announcing its earnings for the quarter ended March on July 1, Srei Infrastructure Finance had revealed that the Reserve Bank of India, in its special audit, had flagged under-provisioning and potential related party transactions worth Rs 8,576 crore.

After considering the legal view, the company has “come to conclusion that the parent company or SEFL (Srei Equipment Finance) have no direct or indirect control or significant influence over such parties and are not under common control and accordingly, are not a related party or the parent company or SEFL,” Srei Infrastructure Finance had said in its exchange notification in July.

Arena Investors and SBI didn’t respond to queries mailed on Friday.

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