The Srei group faces uncertain times with the rating downgrade, the RBI audit

Non-bank lender Srei Infrastructure Finance Ltd has seen uncertainty grow as rating agencies have raised concerns about its deteriorating liquidity situation, while its lenders have yet to approve a proposal to restructure its liabilities. This, against the backdrop of a special audit initiated by the Reserve Bank of India and unfounded allegations that appeared in a news portal.

On Monday, Care Ratings Ltd. downgraded Srei Infrastructure Finance’s long-term bank loans by one notch to BB +, keeping it under observation with negative implications. “The review of the ratings assigned to SIFL takes into account the further deterioration of the liquidity position and the fundraising capacity which had a substantial impact on the consolidated credit risk profile of the company with Srei Equipment Finance Ltd …”, he said. the rating agency said in a December 14 note.

He said that despite the regulatory moratorium on loan repayments that ended in August, lender receipts remained around 50% and a large number of Srei’s borrowers tried to restructure, leading to strained liquidity. “Recent developments could create additional stress for the group if there is a delay in realigning liabilities with cash flows.”

Any restructuring of Srei’s responsibilities, however, has yet to get the green signal.

The lenders met on December 16, but have yet to approve a proposal to convert approximately Rs 9,000 crore, representing three-quarters of Srei’s total debt owed to secured creditors as of August 31, 2020, into five-year unsecured convertible bonds. , according to a person familiar with the matter, who spoke on condition of anonymity.

As the restructuring process has just started two weeks ago, it will take some time for lenders to approve a mutually acceptable plan, a senior executive at Srei Infrastructure Finance told BloombergQuint on condition of anonymity. There are various options considered at this point, this person said, without discussing these options further.

A company spokesperson said the restructuring issue would likely be discussed at a meeting on December 23.

The liquidity position deteriorates

According to the Care Ratings statement, between March and September, the company’s liquidity conditions worsened significantly.

Its liquidity and cash equivalents fell by more than 80% to nearly Rs 25 crore at the end of September, from around Rs 143 crore in the corresponding period last year and around Rs 400 crore in the fiscal year ending 31 March. 2020, according to its consolidated financial statement.

By contrast, the company’s immediate debt service obligations, according to a September 7 note from Acuité Ratings, were around Rs 1,400 crore between September 2020 and March 2021.