SREI Infra Slumps 15% After RBI Conducts Special Audit, Rating Downgrade

On Monday, shares of SREI Infrastructure Finance fell over 15 percent to Rs 5.65 after the firm said that the Reserve Bank of India would be conducting a special audit of the company and its subsidiary.

"We would like to inform you that a special audit of the Company and its subsidiary, Srei Equipment Finance Limited is being undertaken by an auditor appointed by Reserve Bank of India (RBI) in exercise of its powers under Section 45 MA(3) of the RBI Act, 1934," the company said in a BSE filing.

Further, Brickwork ratings downgraded long-term ratings of the firm, adding to the negative sentiment.

"Brickwork Ratings India Pvt Ltd (Brickwork) has revised the ratings for Perpetual Debt Instrument aggregating to Rs 10 crore of the company," the company said in a filing on Sunday.

The rating agency has downgraded the long-term ratings of SREI Infrastructure Finance Ltd (SIFL) on the innovative perpetual debt instrument to 'BWR BB' from 'BWR BBB-'/Negative while placing the ratings under credit watch with negative implications.

"The rating downgrade is mainly driven by continued stress on asset quality in the equipment and infrastructure financing loan portfolios, significant decline in profitability and stretched liquidity position of the company on account of low collections. This, coupled with a decreasing asset base, average capitalisation with continued high earnings levels and the challenging operating environment for Non-Banking Financial Companies (NBFCs), has impacted SEFL's overall credit risk profile. BWR has also taken note that the company has restructured the coupon payments of Perpetual debt instruments by taking the consent of the investors prior to the due date in line with RBI guidelines," said Brickwork Ratings in its report.

"The ratings are placed under "Credit watch with negative implications" considering the expected ALM mismatch arising due to one time restructuring (OTR) being made available to SEFL's borrowers and the resultant adverse impact on SEFL's liquidity and debt servicing capability. Further, the company's earning profile is susceptible to high credit costs as the company is yet to provide a COVID 19 impact as per RBI guidelines," it added.