Creditors Vote To Pursue Group Insolvency For Srei NBFC Twins: BQ Exclusive

Financial creditors of Srei Infrastructure Finance Ltd. and Srei Equipment Finance Ltd. have voted in favour of group insolvency proceedings for the non-bank lenders, according to two people with direct knowledge of the matter.

Creditors representing 99% of Srei Infrastructure Finance's debt and nearly 90% of Srei Equipment Finance's debt voted in favour of the proposal, the people told BloombergQuint on the condition of anonymity.

Later this month, Rajneesh Sharma, administrator for the two companies, will file a petition with the National Company Law Tribunal to proceed with the group insolvency, the people said.

Creditors believed they could have approached the NCLT for group insolvency even if 51% voted in favour. Since such a resolution is not part of the Insolvency & Bankruptcy Code, the proposal did not need to meet the 66% benchmark set under the law, one of the two people quoted above said. With a far larger majority voting in favour, any ambiguity on that count has dissipated.

BloombergQuint awaits responses to queries emailed to the administrator.

Group insolvency essentially allows creditors to consolidate all assets and liabilities of the companies within a group. This is done when a consolidated entity is likely to see more bidding interest than individual companies or when interconnectedness between them is high.

BloombergQuint had previously reported that lenders preferred this option for the Srei non-bank finance companies. The group's promoters had approved a slump sale agreement in 2019, which sought to merge all lending operations under Srei Equipment Finance, keeping Srei Infrastructure Finance as a holding company for it. At the time, lenders did not approve this.

As of June, Srei Infrastructure Finance had borrowings worth Rs 11,746 crore and Srei Equipment Finance owed its lenders Rs 20,411 crore, according to data available in court filings.

About 79% of the combined loan book of Srei Infrastructure Finance and Srei Equipment Finance is now classified as non-performing, according to an internal presentation. The combined loan book stood at Rs 28,455 crore, BloombergQuint had reported last month.