The Reserve Bank of India-appointed administrator has taken charge of Srei Infrastructure Finance and its wholly-owned subsidiary Srei Equipment Finance. This happened after the central bank came down heavily on both the companies over governance issues and superseded the boards of directors.

Citing governance concerns and defaults by the two NBFCs in meeting their various payment obligations, the RBI on Monday superseded their boards and appointed Rajneesh Sharma, former chief general manager of Bank of Baroda, as the administrator of the companies.

“The administrator entered Srei offices on Monday evening after the RBI issued its order, and he took charge immediately. On Tuesday, he talked to senior officials of the two companies,” two persons familiar with the matter told FE. The central bank has also constituted a three-member Advisory Committee to assist the administrator in the discharge of his duties. The members of the Advisory Committee are R Subramaniakumar, former MD & CEO, Indian Overseas Bank; T T Srinivasaraghavan, former MD, Sundaram Finance, and Farokh N Subedar, former COO and company secretary, Tata Sons. On Tuesday, Srei Infrastructure Finance’s scrip closed 5% lower at Rs 8.17 on the BSE.

Commenting on the development on Monday, Srei chairman Hemant Kanoria said, “We are shocked by the RBI’s move”. According to Kanoria, banks have been regularly appropriating funds from the escrow account they have controlled since November 2020. “Moreover, we have not received any communications from banks on any defaults,” he said.

Kanoria said although Srei had submitted a proposal to pay the full amount to banks under a scheme filed under Section 230 of the Companies Act, 2013, in October 2020, the lenders have neither accepted the scheme nor proposed a payment schedule acceptable to them.

“There has never been any delay in loan servicing by Srei in the past before Covid-19 ravaged the country. We are also surprised because the NCLT order for all creditors is still in process. There is also an order for “no coercive measures” by the creditors and/or regulators,” Kanoria said, adding Srei would take all necessary steps as advised by its lawyers in this regard.

According to reports by CARE Ratings, dated March 6, Srei Infrastructure Finance owes banks loans worth Rs 11,117.71 crore, apart from outstanding bonds and non-convertible debentures (NCDs) worth Rs 710.63 crore. Srei Equipment Finance has outstanding bank loans worth Rs 16,912.21 crore and other debt instruments worth Rs 499.45 crore. All these facilities and instruments were rated ‘D’, or default grade, in March. At the end of the first quarter this fiscal year, promoter and promoter group held 60.80% stake in Srei Infrastructure Finance.