Srei Infra mulls deleveraging balance sheet, stepping up recoveries to reduce stress on books

In July, the company’s board gave an approval to raise up to Rs 2,500 crore through various means, including qualified institutional placement.

Given the chequered history of NBFCs—hundreds of them have folded up—it is disappointing, even unpardonable, they are not better regulated.

Srei Infrastructure Finance (Srei) is focusing on deleveraging its balance sheet and reducing stress on its books through recoveries and sell-down of portfolios, according to its annual report. The Kolkata-headquartered non-banking finance company (NBFC) is in the midst of raising equity capital from foreign investors. In July, the company’s board gave an approval to raise up to Rs 2,500 crore through various means, including qualified institutional placement.

Earlier to this, its subsidiary Srei Equipment Finance Ltd (SEFL) attracted a total investment proposal of Rs 4,200 crore from the US- and Singapore-based investors. The pandemic induced lockdown put pressure on the financials of the company, causing asset-liability mismatch, resulting in a record net loss of Rs 7,338 crore in 2020-21 as against net profit of Rs 89 crore in FY’20, the report said.

The company’s earnings per equity share was negative at Rs 145.87 in 2020-21 as against positive earnings per equity share for Rs 1.76 in the year-ago period. Srei mainly borrows money from banks and other lenders for deployment of funds towards financing for asset creation for its customers, it added.

“However, the pandemic has had an adverse effect on our customers, which has affected their cash flows, resulting in muted collections for us,” the report said. Even as the borrowers of the NBFCs were given relief in repayment through moratorium and restructuring because of the economic distress due to the pandemic, no such facility was available to NBFCs from their lenders, resulting in cash flow mismatch, it said.

“Our primary focus has been to deleverage our balance sheet to ensure seamless business continuity. We are in the middle of a debt recast and are trying to raise capital. Further, we are focused presently on recoveries and sell-down of our portfolio to decrease the stress on our balance sheet and generate liquidity,” Srei said in its annual report for FY20-21. “In addition, we are looking to realign our liabilities with the expected cash flows,” it said. The company is also looking at reduce its infrastructure portfolio.

It said that strategic reduction of infrastructure/structured finance portfolio was a work in progress when the pandemic struck and consequently accelerated the process. “Leveraging our domain knowledge and expertise, we will continue to focus and capitalise on the opportunities across the entire infrastructure equipment life-cycle. We are strategically looking to increase our presence in the agriculture, healthcare and technology sectors,” Srei said.

These sectors not only played a critical role during the pandemic, but would continue to do so in the future. The lender approached the National Company Law Tribunal (NCLT) in late 2020, with a debt resolution plan to repay loans to its creditors over a period of time. Srei is mainly engaged in the business of infrastructure equipment financing.

The company said equipment financing and leasing has been its forte, the reason behind its leadership position in the sector over the last 30 years, and its immediate priority is to take the company out of the present crisis by fine-tuning of business model and realigning the outstanding debt to the creditors.

For that, the company is working towards guiding its fully owned operating subsidiary, Srei Equipment Finance Limited, to a stronger financial footing and to come out of the pandemic-induced stress unscathed, the annual report said.

Further, the company with its rich repository of domain knowledge across various infrastructure sectors will become more active in the infrastructure advisory space which is bound to gain traction with the rollout of the National Infrastructure Pipeline (NIP) with an envisaged investment of Rs 111 lakh crore over 5 years.

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