On October 4th, the Reserve Bank of India succeeded the Board of Directors of SREI Infra and SREI Equipment Finance Limited, owing to governance affairs and omissions by SREI Group Companies. Rajneesh Sharma, Ex-Chief General Manager of the Bank of Baroda, was appointed as the Administrator of the companies mentioned above under Section 45-IE (2) of the RBI Act.
The development arrives a week after creditors of the SREI Group declined the top management’s offer to give the company a one-year delay from any sort of action, be it legal or otherwise, to obtain dues calculated at around Rs. 35,000 crore.
The RBI announced that it plans to “shortly initiate the process of resolution of the above two NBFCs under the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 and would also apply to the NCLT for appointing the Administrator as the Insolvency Resolution Professional.”
Last month, Rakesh Kumar Bhutoria, CEO of SREI Infrastructure Finance, resigned, primarily due to salary payment matters.
The Kolkata-based NBFC had been involved in a human resource crunch since December last year. The pandemic-induced economic disaster generated an asset-liability mismatch, with nearly 230-250 people left the SREI group. Consequently, the lenders of the SREI group took over its finances in a bid to obtain their dues. They capped the wages of the top-level officials to ₹50 lakh per annum, which was raised in April this year.
According to the report, for FY21, the CEO and other senior management members intentionally decreased their pay on a scale of 20 to 25 per cent. Chairman Hemant Kanoria had willingly decreased his pay by 30 per cent and surrendered the compensation payable to him from November 1, 2020, onwards.
The chief operating officer (COO) of the company’s division, SREI Equipment Finance Ltd (SEFL), had quit in April. The company secretaries of SIFL and SEFL had quit in March and May. The head of treasury and head of corporate communications had also quit recently.
While SREI and its board wrote to banks numerous times to release arrears and overdue prudent funds and taxes payments, no action has been taken. At the board’s direction, SREI has also suggested the regulator (RBI) about their objections.
SREI group owes about ₹18,000 crores to around 15 lenders, which includes Axis Bank, UCO Bank and State Bank of India. SREI stated that its total accounts come around ₹18,000 crores of bank loans and approximately ₹10,000 crores of external business borrowings and bonds.