Srei Equipment Finance (SEFL) on Thursday assured its bondholders that their money will be repaid and said the collateral against the loans given by the company together with the receivables are sufficient to cover all its liabilities.
The company also said it has proactively approached the NCLT proposing a repayment plan for loans.
In a communique addressed to the non-convertible debenture (NCD) holders of Srei Equipment Finance, the company's chairman Hemant Kanoria said the last 12 months have been extremely challenging for all following the unprecedented pandemic.
"Since our customers are primarily from the infrastructure space, most of them have been severely impacted by the pandemic induced lockdown, movement of migrant workers and twin shocks encompassing both demand and supply side of the value chain.
Payment delays from government departments and large corporates added to their woes and impaired the ability of many of our SME borrowers to service their loans. As a result, our collections suffered with more than half of our customers opting for one-time restructuring of their loans," SEFL said in a regulatory filing through its listed parent company Srei Infrastructure Finance Ltd (Srei).
Srei is fundamentally dependent on borrowings from banks and other lenders for deployment of capital towards asset creation of customers and once the repayments from customers suffer, "our ability to maintain our impeccable repayment track record with our creditors also suffers", said the chairman.
Gauging bondholders' worry as to how the company will survive this crisis and repay the money it has borrowed since the outbreak of COVID-19, he said: "We wish to assure our investors that the collateral/securities against the loans given by your company together with the receivables are sufficient to repay all the liabilities in an orderly manner over a period of time."
"Our strong OEM relationships, nearly 90,000 retail investors, about 80,000 shareholders and long standing partnerships with domestic banks, financial institutions and international development finance institutions gives me confidence that your company will weather the impact of this pandemic on its business and emerge out of it stronger," he added.
The company said it proactively approached the NCLT with a scheme proposing repayment of loans in an orderly manner over a period of time. This is one-of-a-kind instance of an NBFC proactively proposing a repayment plan in anticipation of stress in multiple sectors in which it operates, it added.
"Your company will repay its loans through the recoveries and hence a scheme has been proposed to all our creditors to realign the repayment schedule with our expected collections from customers."
India's construction and mining equipment market is about Rs 50,000 crore per annum, in which Srei group has been one of the prime movers, it said. However, the company said it recognises that it needs to prune its balance sheet, operate primarily in the bank compliant asset market and change the duration of liabilities to meet the extant and emerging regulations.
The company said it has already initiated necessary steps in this regard, including aggressive sell down of assets, reduced disbursements and attempt to re-profile liabilities.
"While because of the pandemic and the heightened risk aversion towards NBFCs some of these transformations have not happened at the pace at which we wanted, we are totally committed…we need support and guidance from the RBI and our banking partners to ensure effective transition of our business model," it said.
SEFL further said it has appointed EY as its primary advisor to work alongside the creditors and their advisors. In the coming months, the company said it expects concrete engagement/ progress in areas such as debt alignment, equity raising plan and stabilisation of ongoing operations.
In a separate filing, SEFL said it has received expression of interest for up to $250 million (about Rs 1,864.35 crore) capital infusion from foreign investors. The Srei group has been seeing the exit of its employees, including top-level officials, since December as the lenders have taken control of company finances, to the extent that they have put a cap of Rs 50 lakh salary for top executives.
The Kolkata-headquartered Srei group owes nearly Rs 18,000 crore to as many as 15 lenders, including SBI, Axis Bank and UCO Bank. The parent Srei Infrastructure Finance posted a huge consolidated net loss of Rs 3,810 crore during the third quarter of the previous fiscal on account of higher provisioning.
