RBI identifies probable related party loans given by Srei group

RBI has directed Srei Infrastructure Finance Ltd, the parent company, and Srei Equipment Finance Ltd (SEFL), a subsidiary, to reassess and factor in the impact of certain parties during the finalization of the balance sheet for FY21, and to ensure relevant accounting treatment and appropriate disclosures were made. “In view of the observations and directions of RBI as stated in the inspection report and risk assessment report, the parent company and SEFL has been advised to reassess and re-evaluate the relationship with the said parties to assess whether they are related parties to the parent firm or to SEFL and also whether these are on an arm’s length basis.”

The group said it had consulted legal experts to determine whether such parties were related, and, based on the opinion , they have come to the conclusion that the two companies did not have direct or indirect control or significant influence over such parties.

“Further, in view or the directions, in line with arm’s length principles, SEFL is in the process or reassessing and renegotiating terms and conditions with the borrowers and all other borrowers, who have been granted loans with a moratorium period and at an interest rate which is linked with the cashfow of the project, while ensuring that the overall yield is maintained,” Srei said.

Srei Infrastructure Finance said its board of directors has passed a resolution to raise up to ₹2,500 crore. SEFL also received a term sheet from Makara Capital Partners for an investment of ₹2,200 crore, besides ₹2,000 crore from Arena Investors LP. That apart, SEFL has received expressions of interest from private investors such as Cerberus Global Investments, Charlestown Capital Advisors and Maystone Capital. While Srei Infrastructure Finance owes ₹11,117.71 crore to banks, SEFL owes ₹16,912.21 crore, according to data from CARE Ratings.