Non-bank lender Srei Infrastructure Finance Ltd has seen uncertainty build up as rating agencies have raised concerns about its deteriorating liquidity conditions, while its lenders are yet to approve a proposal to restructure its liabilities. This, against the backdrop of a special audit initiated by the Reserve Bank of India and unsubstantiated allegations appearing in a news portal.
On Monday, Care Ratings Ltd. downgraded long-term bank borrowings of Srei Infrastructure Finance by one notch to BB+, while keeping it on a rating watch with negative implications. “The revision in the ratings assigned to SIFL takes into account the further deterioration in the liquidity position and fundraising ability which has substantially impacted the consolidated credit risk profile of the company with Srei Equipment Finance Ltd…,” the rating agency said in a note dated Dec.14.
It said that despite the regulatory moratorium on loan repayments ending in August, collections for the lender have remained at about 50% and a large number of Srei’s borrowers have sought restructuring, leading to stretched liquidity. “The recent developments could create further stress for the group if there is a delay in the realignment of liabilities with cash flows.”
Any restructuring of Srei’s liabilities, however, is yet to get the green signal.
Lenders met on Dec.16, but are yet to clear a proposal to convert about Rs 9,000 crore, which accounts for three-quarters of Srei’s total debt due to the secured creditors as on August 31, 2020, into five-year secured non-convertible debentures, according to a person familiar with the matter, who spoke on condition of anonymity.
Since the restructuring process has just started two weeks ago, it will take some time before lenders approve a mutually agreeable plan, a senior executive at Srei Infrastructure Finance told BloombergQuint on the condition of anonymity. There are various options being considered at this point, said this person, without further discussing those options.
A spokesperson for the company said the matter of restructuring is likely to be discussed in a meeting on Dec. 23.
Liquidity Position Deteriorates
According to the Care Ratings statement, between March-September, the company’s liquidity condition has worsened materially.
Its cash and cash equivalents fell over 80% to nearly Rs 25 crore as of the end of September, from about Rs 143 crore in the corresponding period last year, and about Rs 400 crore in fiscal ended March 31, 2020, according to its consolidated financial statement.
Against that, the company’s immediate debt servicing obligations, according to a Sept. 7 note by Acuité Ratings, were about Rs 1,400 crore between September 2020-March 2021.