Srei Group In Talks With At Least Seven Investors For Capital Infusion: BQ Exclusive

The group has been seeking investors after Srei Infrastructure Finance and Srei Equipment Finance failed to repay creditors amid business disruptions caused by the Covid-19 pandemic.

According to the people quoted above, the investors which the Kolkata-based group is currently in talks with include:

• Makara Capital

• Arena Investors

• Varde Partners

• Ares SSG

• Cerberus Capital Management

• CarVal Investors

• Charlestown Capital

Of these, Singapore’s Makara Capital is willing to invest Rs 2,200 crore in Srei Equipment Finance, while Arena Investors may look to put in Rs 2,000 crore, Srei Infrastructure Finance Ltd. had disclosed in exchange filings on June 18 and 19.

They are open to investing the funds if the deal structure appeals to them, the first of the two people quoted above told BloombergQuint on the condition of anonymity. Makara and Arena, in April this year, had submitted their expressions of interest.

The other five investors are still in early discussions with Srei Group, the two people said.

The investment talks are being led by a strategic coordination committee at Srei Group, with EY acting as an adviser. Srei Equipment Finance is a 100% subsidiary of Srei Infrastructure Finance.

BloombergQuint’s queries mailed to Ares SSG, CarVal Investors, Cerberus Capital Management and Charlestown Capital on Wednesday morning didn’t elicit responses immediately. Varde Partners and a spokesperson for Srei Group declined to comment.

Srei Infrastructure Finance’s board is set to meet on Wednesday to finalise the company’s results for the last financial year and discuss fundraising plans. The fundraising plan, according to an exchange filing, could include qualified institutional placement, preferential issue, and rights issue, among other modes.

Srei Group’s fundraising plans come amid months of negotiations with various creditors, including banks. Since the onset of the pandemic, the group’s lending arms—Srei Equipment Finance and Srei Infrastructure Finance—have faced considerable financial difficulties. While as lenders they extended moratorium and restructuring to their borrowers, they could not avail these benefits themselves.

The group has proposed a scheme of arrangement to its lenders where nearly 75% of the bank debt to Srei Equipment Finance will be converted into non-convertible debentures. The banks are yet to approve the scheme.

Rating agencies CARE Ratings Ltd. and Brickwork Ratings hold default grade ratings for Srei Infrastructure Finance’s instruments.

As on Sept. 30, 2020, consolidated borrowings of Srei Infrastructure Finance stood at Rs 31,435 crore compared with Rs 33,108 crore a year ago. Data for December-quarter borrowings is not available. Bank borrowings contributed 59.49% of its total borrowings, while non-convertible debentures stood at 13.27%.

In the quarter ended December, Srei Infrastructure reported a consolidated net loss of Rs 3,811 crore compared with a net profit of Rs 60 crore a year ago. Its total income fell 66% year-on-year to Rs 484.35 crore in the third quarter of FY21. Expenses jumped as costs due to impairment of loans rose to Rs 2,833 crore from Rs 26 crore in the prior year.