Kanoria blames Covid for mess at Srei Group

Kolkata: Hemant Kanoria, the embattled businessman who pioneered infrastructure financing in the country way back in 1989, has said the pandemic and the resultant cash-flow issues coupled with his own earnestness to pay back the lenders by legitimately approaching the courts for debt restructuring are the reasons for the mess at the Srei Group at present.

Kanoria also said that if the Reserve Bank had given the Srei Group more time to adjust to the new regulatory norms which are mostly suited for banks and other NBFCS not an infra financing company, which began after the IL&FS downfall, and accepted that their business was not typical of other retail/housing NBFCs, the group wouldn't have ended up the way it has now.

"But I've no regrets, instead I am happy that I pioneered infrastructure financing in this part of the world and successfully run it for more than three decades - from what was a Rs150 crore industry when we started off to a Rs 50,000 crore industry now," Kanoria told PTI in his first media interaction since October 4, 2021, when the Reserve Bank superseded the boards of Srei Infrastructure Finance and Srei Equipment Finance and sent them to the Kolkata NCLT for bankruptcy resolution later that week.

These two owe around Rs 32,000 crore to the system: around Rs 18,000 crore to banks led by Uco Bank (Rs 3,000 crore), SBI and Union Bank (Rs 2,000 crore each), Axis Bank etc; and over Rs 10,000 crore in ECBs and bondholders and around Rs 4,000 crore to others. The RBI acted even as Srei's equity infusion proposals from many global investors, including Singapore's Makara Capital (Rs 2,200 crore) and US-based Arena Investors (Rs 2,000 crore), were pending with it.

"The only reason for our January 2021 move to get a debt recast proposal approved by the NCLT was to ensure that we fully repaid our lenders after we found cash-flow issues since the pandemic; in fact, our problem began after IL&FS went belly-up in October 2018. The problem cropped up because the RBI allowed our borrowers to avail of the moratorium but did not allow banks to offer moratorium to their NBFC borrowers," Kanoria said.

"In fact, by going to the NCLT with a 10-year repayment schedule under the provisions of section 230 of the Companies Act 2013, and not under the IBC, we were pre-empting a default. But instead we are in the IBC now!," he said. But ironically, lenders led by Uco Bank rejected the NCLT approved debt restructuring proposal, saying Srei was not a defaulter and "even today I don't understand why we were refused a moratorium", he said.

"Had the then Uco Bank chairman (Atul Goyal) not taken our going to the NCLT as a personal affront, I am sure none of us would have been in the mess we are in today," Kanoria said, adding they have no plans whatsoever to challenge the IBC resolution as and when it comes in at any higher legal forum. In fact, Srei and also the entire NBFC universe began to feel the ground under their feet slip away when IL&FS went belly up in October 2018.