RBI supersedes Srei’s Board. Appoints administrator.

RBI on October 4, 2021 superseded the struggling NBFC, Srei’s board, appointed an administrator (ex CGM of Bank of Baroda) and intends to shortly put it under the insolvency process (ICBC).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.

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