RBI on October 4, 2021 superseded the struggling NBFC, Srei’s board, appointed an administrator (ex CGM of Bank of Baroda) and intends to shortly put it under the insolvency process (ICBC).
Action has covered both Srei Infrastructure Finance and it’s wholly owned subsidiary Srei Equipment finance Ltd.
Key points to note –
- The action came as a surprise to many as Company in any case was under the control of lenders who were trying to restructuring it.
- I guess the action was due to the inability of the lenders to put any material revival plan in action. There were efforts to bring in investors but nothing major was happening. CEO and many other key people had also recently left the Company. It was becoming increasingly difficult to manage the operations.
- The recent resolution of DHFL through Piramal would have also prompted RBI to follow the same route and see what best can be done. Haircuts/ write-offs by the lenders is given – however the continuation of status quo may have further impacted, whatever is left.
- Current overall positive sentiments in the financial markets would have further prompted the regulator to bite the bullet – hoping that the cascading impact might be absorbed relatively better.
Overall, under the given circumstances it does seem to be a step in the right direction. Promoters as expected have called the action unwarranted.
Srei Group Promoters move Bombay HC against RBI insolvency action. The promoters are also seeking stay on the appointment of the administrator.
Bombay HC dismisses Srei Group’s plea against RBI action
The Reserve Bank of India (RBI) on Tuesday debarred audit firm Haribhakti & Co from undertaking audit assignments in any of the banking and non-banking financial companies (NBFC) for two years starting April 1, 2022 for failing to comply with its direction.
Haribhakti was the auditor of SREI Infrastructure Finance (SIFL), a listed firm, for 2019-20.
Auditor has flagged Rs 13,110 cr of fraud deals as per the notes in Srei’s Sep-22 quarterly results.
The auditor said that it had appointed a professional agency to look at the transactions and the agency (BDO) had flagged loans amounting to Rs 13,110 crore as fraudulent under section 66 of the Insolvency and Bankruptcy Code.
This is the third time auditors have flagged fraudulent transactions in the group. In June, the auditor had flagged Rs 3,025 crore transactions as fraud followed by a second submission where Rs 2,134 crore were flagged.
Spokesperson for the promoters has refuted the allegations and said that they are transactions in normal business course, but are highlighted as fraud due to the lack of competence and business understanding on part of the BDO.