InvestorQ : What is happening to SREI Group and why do lenders want to break up the company?
Moii Chavate made post

What is happening to SREI Group and why do lenders want to break up the company?

Tisha Malhotra answered.
2 years ago

SREI has been for long one of the premier infrastructure financiers in India. In the last few months, they undertook a restructuring of their businesses without taking all the lenders into confidence and that proved to be big mistake.

Now the lenders to SREI have proposed to split the cash flows of SREI Infrastructure Finance and its unit, SREI Equipment Finance, via 2 separate escrow accounts to ensure dues are paid promptly. It merged the lending businesses of the 2 entities with lender consent.

Lenders have repeatedly alleged that SREI consolidated its lending business into SREI Equipment only with the consent of UCO Bank and Axis Bank. Other banks were informed only after the consolidation came into force. Currently, lenders are monitoring cash flows of both divisions and have asked to keep cash flows of the two companies separate.

The lenders who have their skin in the game also plan to challenge the Kolkata NCLT order in the NCLAT. The Kolkata bench of NCLT had already even initiated the process of asset transfer and scheduled creditor meetings later the month. The lenders have contended that the NCLT should never have given the approval without the assent of all lenders.

The problems at SREI have been brewing for quite some time now and the company has found itself in a spot after the infrastructure revenues started faltering and it was hard pressed to service the debt. They are now planning to get out of infrastructure financing altogether but it may be a tad too late to save the company, as it hurtles downhill.