Srei Equipment Finance: First Meeting of Creditors’ Committee To Be Held on Tuesday
Moneylife Digital Team 01 November 2021
The first meeting of the committee of creditors (CoC) of Srei Equipment Finance Ltd (SEFL) is scheduled to be held on 2nd November at Marriott in  Kolkata under regulation 19 of the Insolvency and Bankruptcy Rules (IBC) 2019. 
 
The CoC is expected to discuss and update on the corporate insolvency resolution process (CIRP) and its timelines, status of claims and composition of the CoC, cash-flow position, expense budget and way forward on modalities of running the resolution process. 
 
As debenture trustee, Axis Trustee Services Ltd will be attending the meeting on behalf of debenture-holders. The meeting minutes and voting process will be uploaded after the meeting and will be intimated via emails. Debenture-holders are not expected to attend the meeting.
 
Axis Trustee Services, the debenture trustee for various listed secured and unsecured NCDs (non-convertible debentures) issued by the Srei group, has written a mail to NCD-holders with the details. NCD-holders can write to Axis Trustee Services at their dedicated email id [email protected]  or reach them on their WhatsApp number 8104889519.
 
Earlier, the NCDs issued by Srei Infrastructure Finance Ltd (SIFL) were transferred to SEFL via a slump sale approved by the BSE on 26 February 2020. 
 
While Axis Trustee Services has adopted a proactive stance in communicating with the investors right from the beginning of the year, Catalyst Trusteeship is in stark contrast, at the other end of the spectrum with no communication to investors and a severely clogged email ID, which bounces back any sent emails. Debenture trustees play a crucial role in representing the debenture-holders, protecting their interests and communicating effectively with the investors. 
 
In the recently resolved Dewan Housing Finance Ltd (DHFL) case, NCD-holders have been shouting hoarse that Catalyst Trusteeship fell woefully short on all these counts. Even after the resolution process, Catalyst Trusteeship did not update the investors when the payments were being processed.
 
Catalyst Trusteeship showed very little interest and a total lack of communication throughout the IBC proceedings of DHFL, irate investors said. The same thing is also happening in the DS Kulkarni Developers (DSK) case. This makes Catalyst’s claims of “enhanced speed of ease of communication in default cases of debentures” appear laughable. 
 
 
 
 
 
Earlier this year, the Reserve Bank of India (RBI) conducted an audit and flagged more than Rs 8,000 crore of probable related-party lending by the Srei group. Last month, RBI superseded the boards of SIFL and SEFL due to governance concerns and defaults.  
 
The special audit conducted by RBI during December 2020-January 2021 observed that funds disbursed to certain borrowers were received back from such borrowers or their group companies on the same date or dates close to the disbursement date, indicating evergreening.
 
In April this year, Srei appointed KPMG Assurance and Consulting Services LLP and DMKH & Co, chartered accountants, to conduct a forensic audit as part of its proposed debt realignment. Srei’s consolidated borrowings as of 30 September 2020 was at Rs30,000 crore.
 
Banks are preparing to classify loans worth Rs35,000 crore made to Srei group as non-performing assets (NPAs) in the September quarter. 
 
This is the second instance after DHFL, where an NBFC (non-banking finance company) has been referred for insolvency at the banking regulator’s direction.
 
Experts pointed out that Srei companies own infrastructure assets compared to DHFL, which had home loan borrowers, branches, and an excellent geographical presence. Even then, lenders of DHFL had to accept about 65% haircut.  DHFL had more retail loans while Srei group has more lumpy infrastructure lending (similar to what is seen in IL&FS case)—for instance, loans for roads and power projects.
 
While Piramal was interested in buying DHFL’s retail home loan portfolio (which became attractive even as interest rates fell and the realty market appeared to recover after a long period of distress), it will likely be a challenging task to find a buyer for infrastructure assets and the Srei group is a tangled, complex web of holding companies, subsidiaries, funds, asset management companies (AMCs) and trusts.
 
The Kanoria Foundation is at the top and has four fully-owned holding companies—Aksara Commercial, Adisri Commercial, Adishakti Commercial & Vara Technology—through whom it owns its web of almost 50 companies. SIFL has lent to a few companies in which Kanoria Holding has an indirect or even direct interest. For instance, it has loaned to Shrishti Infra, which Adishakti Commercial owns, while SIFL itself is owned by Adishakti Commercial. A lot of such transactions can be seen in the group which led RBI to order an audit earlier this year.
 
The Kanoria Foundation has also floated trusts which, in turn, invested in some companies. For instance, IPCL, a company owned by Aksara Commercial, transferred its investment division to Power Trust. It is not known who are the beneficiaries of this trust. Still, since it was formed out of assets owned by a Kanoria subsidiary, it is possible that the Kanoria Foundation and/or the Srei group could be a beneficiary, if not the biggest beneficiary of the trust. Bankers believe that SIFL has lent some companies owned by the Trust which appear to be related lending. 
 
The Kanoria Foundation has also floated funds such as Srei Alternate Investment Trust and Srei Multiple Asset Investment Trust which own companies that SIFL and SEFL have lent to. 
 
Loans to some group companies have been lent at attractive rates for the long term -1% for the first five years, with interest bunched up to yield 12% from the 5th to the 8th year. 
 
Both Srei companies are non-deposit taking NBFCs; hence, unlike in the DHFL case, investors have only invested in NCDs, and there are no funds stuck in company deposits. 
 
Many of these investors (mostly senior citizens) invested in the bonds in the hope of getting better returns on their investment since Srei group was offering up to 11.75%  interest per annum (along with an additional 0.25% for shareholders, existing bond-holders and senior citizens), at one point of time. 
 
Comments
garani.vittal
4 weeks ago
Big Lessson Never invest in NBFC either in FD or in NCD eventhough it is secured and has AAA rating(The Only Bigger ones you may have little trust is Bajaj Finance, Mahindra finance and Shriram Transport but still we cannot predict what happens in future)
In case of DHFL only secured NCD investors who had invested between 0-2 lakhs got the principal the rest of them who invested more than 2 lakhs got 46% of the principal. We had DHFL going to IBC, Now it is SREI and many who invested in RHFL(Run By Anil Ambani) also have not get any interest /Principal.

DHFL
SREI
RHFL


naga_narasimha
2 months ago
They are killing retail investors by making the company bankrupt. The investors have been made bankrupt. After the Covid, prices have shot up but our income has come down. The organised sector workers are compensated by DA. We are left high and dry. Why the government has no concern for senior citizens I don't understand.
baman.pani
3 months ago
We are investing our hard earned money keeping faith upon the government system, if companies will bankrupt over the night and we became looser then people will follow the old banned act of Mahajani Act. I hope the authorities will protect the investors interest .
Gopal krishnan
Replied to baman.pani comment 3 months ago
Sir, Most of us are old people; now in the same boat. Let us wait and see the outcome.Hope they will not let us down.
harpreetcheema101
3 months ago


Kanoria family has blamed to COVID-19 19 for downfall, themselves approved to be more dangerous them COVID-19 22 interrelated unlawfully, unauthorized financial transactions. Konaria had sprinkled salt on the booms of Insenosents investers especially senior citizen like me have Deetrioaded the life spam. Even govt is providing special benefits and respecting senior citizens in all way.

bsood0
3 months ago
Axis must care for senior citizens, as being the one who do not get any pension, depend upon the interest income in their old age. We can't be faulted with as we had invested in the SECURED instrument which is duly scrutinised by the govt. agencies.

Unlike dhfl, In the SREI case the total value of retail Bond Holders is not even Rs 2000 crore out of Rs 35000. Moreover, there are no FD holders. Therefore the retail Bond holders should be paid off from the collection of Rs 3000 made by the company during the moratorium period. It is reported that banks have adjusted that amount. If it is true then it is unlawful as it was NCLT who had to approve of the use of money. In all fairness that rs 3000 should be recovered from the banks.
Jay roy
3 months ago
[email protected]

Business head catalyst trustee
garani.vittal
3 months ago
Also don't believe in rating agencies company rated AAA might become default within one month
garani.vittal
3 months ago
The resolution might end up similar to dhfl. Big lesson not to put even in secured ncd be happy in investing post office bank fd upto 5 lakh insurance and rbi bonds which are 100 percent secured
premsehgal55
Replied to garani.vittal comment 3 months ago
True
kapiltiwari612
3 months ago
I am a small investor. I have lost my job during covid pandemic time last year and after that I am still unemployed. I have invested in SEFL secured ncds opted for annual interest payout and my family dependant on interest income. Hv not received interest except for last three year with delayed payment. Am in dire necessity of funds. Request regulators and other organisations interested in safeguarding interests of small investors to help investors like me.

amrita.venkatraman56
3 months ago
Axis do something for senior citizens, as being seniors, my husband and me have invested in srei ncds coz of the attractive rate of interest on which every senior citizens are learning to make their ends meet. Interest is the only source of income for the seniors and with sky rocketing prices day in and day out, we as seniors find it very difficult to manage our monthly expenses, so it's sincere request to help find solutions and help the seniors atleast to live a dignified life. We as seniors have full trust in Axis trustee.
devenderrawat2910
3 months ago
Axis trust hope you will do a good job keeping the interest of the old age people who have deposited their money in the hope of making a living in the old age. I also have debentures but please give precedence to the old age people during the liquidation.
murlidar
3 months ago
Since meeting of the committee of creditors (CoC) of Srei Equipment Finance Ltd (SEFL) is scheduled to be held on 2nd November ONLINE, I DONT SEE WHY ATLEAST THE DEBENTURE HOLDERS ARE NOT ALLOWED TO ATTEND ONLINE and see for themselves if their interests are attended to in right earnest bythe debenture trustees. (if not participate actively). So many company AGMs are held online in the past. Hence, request the Committee of creditors to share the login with all debenture holders by email.
Gopal krishnan
3 months ago
Received information;Watching. Thanks for your updated developments.????
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