Thursday, January 5, 2023

poor banks NARCL is the highest bidder for two struggling SREI businesses

Bad bank NARCL is highest bidder for 2 troubled Srei companies


Mumbai and Kolkata: The National Asset Reconstruction Company (NARCL), which is owned by banks in the public sector, has won the bid for the two SREI companies. The bad bank has offered Rs 5,555 crore for Srei Infrastructure Finance (SIFL) and Srei Equipment Finance (SEFL), according to sources.

With an offer of Rs 5,526 crore, Authum Infrastructure comes in second. It appears that Varde Partners and Arena Investors, the third bidder, did not participate. Even though the auction was held on Tuesday, the outcome wasn't known until Wednesday, when the process continued into the wee hours of the morning.

According to the Insolvency and Bankruptcy Code (IBC), all bids must be reviewed by the committee of creditors (CoC) before they can be voted on. Additionally, the lenders are likely to request an extension of the IBC deadlines for completing the resolution.

Since the RBI replaced the boards of SIFL and SEFL in October 2021, the companies have been subject to insolvency proceedings. Claims totaling Rs 32,750 crore have been accepted by the administrator.

Canara Bank, StateBank of India, and Punjab National Bank are among the financial creditors that have significant stakes in the Srei twins. Axis Bank, Punjab & Sind Bank, HDFC Bank, Union Bank of India, IDBI Bank, UCO Bank, and Indian Overseas Bank are additional lenders.

In the 10-hour "challenge mechanism" that the CoC held on Tuesday, NARCL's net present value bid, which represented Rs 3,200 crore in cash, outperformed the previous plans by Rs 1,000 crore.

The two most important parameters in the challenge mechanism process are the upfront cash component and the committed amount's net present value (NAV) under the financial proposals. On Srei's balance sheet, there is cash worth Rs 2,200 crore. To acquire the Srei assets, the successful bidder must inject Rs 1,000 crore in cash. In addition to cash, a short-term recovery of Rs 3,450 crore is anticipated in two to three years, and the successful bidder will issue optionally convertible bonds worth Rs 8,000 crore for up to seven years, according to a source familiar with the situation.

According to the source, "in the worst case, recovery for lenders from the Srei resolution process is expected to be Rs 9,500-10,000 crore, out of approximately Rs 32,000 crore exposure."

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