NARCLs Strategic Move Resolves Rs 32,700 Crore SREI Debt

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In a significant development, the National Asset Reconstruction Company (NARCL) announced the successful acquisition of two SREI companies – SREI Equipment Finance and SREI Infrastructure Finance – under the Insolvency and Bankruptcy Code (IBC). This strategic move paves the way for the resolution of a substantial financial debt amounting to Rs 32,700 crore, as stated by NARCL.

Consolidated Resolution Plan

The consolidated resolution plan, as part of the IBC process, promises approximately 50% upfront recovery for the lending consortium. Additionally, there is the potential for substantial upside beyond the committed payment in the resolution plan, according to a statement.

NARCL's Commitment

N Sundar, Managing Director & CEO of NARCL, expressed his delight at emerging as the successful resolution applicant, describing it as one of the largest time-bound resolutions in recent years. He emphasized NARCL's commitment to reviving SREI's equipment lending business and working collaboratively with stakeholders to derive optimum value for both entities. Sundar assured the implementation of a robust business continuity plan to ensure seamless integration, minimizing disruptions, and maximizing efficiency.

Regulatory Approvals

The resolution plan received approvals from the National Company Law Tribunal (NCLT), the Reserve Bank of India (RBI), and the Competition Commission of India (CCI). The Kolkata bench of NCLT had earlier approved the resolution plan in August after the consolidated Committee of Creditors (CoC) endorsed NARCL's offer with the highest voting among bidders.

NARCL's Offer Prevails

NARCL's offer prevailed over competitors Varde Partners and Arena Investors, and Authum Investment. According to the government-owned ARCs resolution plans, funds will be infused into Srei Infrastructure Finance (SIFL) to nurture the NBFC's business. SIFL will focus on equipment finance and retail finance, among other sectors. Srei Equipment Finance (SEFL) will play a crucial role in recovering bad assets and repaying lenders before being wound up.

Adisri Commercial's Challenge

It's worth noting that Adisri Commercial, the promoter of SIFL and SEFL, has moved the National Company Law Appellate Tribunal (NCLAT) after NCLT Kolkata dismissed its application, challenging the initiation of insolvency proceedings against the two NBFCs. The appellate tribunal is currently reviewing the matter.

The acquisition of SREI Equipment Finance and SREI Infrastructure Finance by NARCL marks a significant step in resolving a substantial financial debt and reviving the equipment lending business. With the implementation of a robust business continuity plan and the support of stakeholders, NARCL aims to derive optimum value for both entities and ensure a smooth transition.