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As particular audit of Srei Infra Finance begins, it is déjà vu for banks and stuck earnings market

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KOLKATA: For bond consumers and India’s prime banks, it’s a sense of déjà vu because the Reserve Bank of India (RBI) conducts a particular audit into Srei Infrastructure Finance, hinting that one thing is likely to be amiss on the financier that has greater than Rs 30,000 crore in excellent loans. The firm, on its half, described the audit as a ‘regular’ regulatory scrutiny.

Some of the lenders have already rescheduled Srei’s loans when the entity confronted cash-flow mismatches following the lockdown and RBI-guided moratorium of mortgage reimbursement to its time period mortgage debtors, two folks acquainted with the matter mentioned.

The quantum of loans rescheduled shouldn’t be recognized, however lenders mentioned that the corporate was going through liquidity tightness. Out of a complete of Rs 31,435 crore of borrowings on the finish of September, about Rs 25,000 crore is by means of working capital and time period loans from banks.

The non-banking finance sector (NBFC) has been going via doldrums following the defaults by some huge names like IL&FS and DHFL making traders and lenders extremely cautious.

“COVID-19 has definitely affected the cash flow of our clients, who are primarily contractors and infrastructure companies. In view of the present situation, many of our customers have sought to align repayments with their cash flows. Our liquidity is similarly aligned to those of the clients, which has been in accordance thereof,” a Srei spokesperson mentioned.

The group has now been specializing in co-lending with banks to preserve money.

“The strategy for the ensuing year will be to conserve cash by conducting low risk business, reduce cost wherever practically possible, focus on improving customer relationship with a view to have better recovery and to make technology the principal medium for doing business,” Srei chairman Hemant Kanoria had mentioned within the firm’s annual report for FY20.

The firm has nearly Rs 1 crore in present accounts with banks as on September as in opposition to Rs 45 crore a 12 months again.

The firm on Friday instructed inventory exchanges that an auditor appointed by RBI is doing a particular audit of the corporate and its subsidiary, Srei Equipment Finance.

Last 12 months, the administration had carried out a stoop sale of Srei Infrastructure Finance to Srei Equipment Finance Limited, which concerned the switch of companies, belongings and liabilities together with the liabilities towards excellent non-convertible debentures. The scheme was challenged by one of many debenture holders of SEFL holding. Consent from different lenders remains to be awaited.

“In the past six years, it has been a conscious decision on part of the management to grow the equipment financing business where we have market leadership, and to gradually bring down our exposure to project financing where the progress has been slow due to various policy hindrances,” Kanoria mentioned within the annual report.

The group’s disbursement fell to Rs 11,681 crore in FY20 from Rs 21,229 crore within the earlier 12 months.

Srei holds 3.34% in Lakshmi Vilas Bank, which is now below a 30-day moratorium and to be merged with DBS Bank India. As the shares of the financial institution have now been extinguished, it might be a loss for shareholders together with Srei.

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