RBI Supersedes the Board of Directors of SREI Group

RBI Supersedes the Board of Directors of SREI Group

Indian Market
by 5paisa Research Team Last Updated: 2022-08-08T18:50:57+05:30

In a move that was being demanded by the banks for some time, RBI has superseded the boards of SREI Infra and SREI Equipment Finance. RBI has appointed Rajneesh Kumar, the former CGM of Bank of Baroda, as the administrator for the two companies. The decision was taken by the RBI over governance concerns and a spate of defaults by SREI group.

The Kanoria owned SREI Group had been in a solvency crunch for some time now due to bad loans and asset liability mismatches. Since the peak of mid-2017, the stock price of SREI Infra has fallen over 94% from Rs.137 to Rs.8, reflecting the larger structural problems. SREI had asked time from banks to restructure repayments, but banks were sceptical.

Last week, the banks made a fresh demand to the RBI to suspend the board of directors of SREI Infra and SREI Equipment Finance and refer the company to the NCLT for bankruptcy resolution. The SREI group, therefore, becomes the second NBFC after Dewan Housing Finance to be specially referred to the NCLT by the RBI.

Check - DHFL Lenders to get payments this week

The SREI group owes close to Rs.30,000 crore to banks and other creditors and that makes it systemically important. In December 2020, the lenders had already taken control of the cash flows of the SREI group and had since then adjusted Rs.3,000 crore from the Trust and Retention Account (TRA) towards their loan dues. 

While talks for debt realignment were on between the consortium of banks and SREI Group, the banks had insisted on a forensic audit of the group to ensure that there were no cases of money laundering or round tripping of funds by the company. However, with defaults piling up, the UCO Bank led consortium approached RBI.

Perhaps, the trigger for the decision came from a series of recent senior level exits. After the banks had ordered a salary freeze on the top managers, the CEO, Rakesh Butoria, COO Pavan Trivedi and the company secretary Sandeep Lakhotia had resigned from the group. This had raised serious doubts about the ability of SREI to continue as a going concern and forced the banks to seek RBI intervention in superseding the board of SREI.

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