SREI NCD case | SREI default

SREI NCD default case explained

Non convertible debentures (NCD) are considered one of the most safe and fixed income source by most of the investors. But I believe things are not that secured or safe, this was recently seen in case of NCD issued by SREI Group (SREI Equipment Finance Ltd. and SREI infrastructure Finance Ltd.). These were issued around year 2017/18 and most of the investors were middle income group and too the with the age group of retired people.
These retired people or pensioners are dependent on the fixed income ( in form of interest ).

The ratings which are considered as indicator of good debtor / issuer changed overnight, people were puzzled not to see their interest installment. And then there was news in the market that the SREI may fail to pay interest and even principal. Then people found out that promoters messed up the management of company and SREI group is facing liquidity crisis.
The big players (Banks who loaned money to SREI companies) reached RBI and a administrator was appointed who took the case to NCLT ( National company law tribunal ), Kolkata.

Timeline:

1. Issued year around 2018
2. SREI promoters proposed a full payment of bank loan to the banks and bank took control over a escrow account out of which 3000 crores was utilized by banks in Nov 2020 
3. The default of interest started by SREI from Jan 2021
4. SREI companies defaulted repayment of principal at maturity April / May / June 2021
5. Bank went to RBI for their priority settlement from SREI Oct 2021
6. Administrator was appointed by RBI to supersede the board of SREI companies
7. Insolvency petition was filed by RBI in NCLT
8. NCLT approved NARCL ( National Asset Reconstruction Company Ltd ) plan for liquidation

The Outcome for NCD holders:

NCD holders primary non-institutional ( individual ) were the people who were forced to accept less that what they invested.
For a person who invested INR 50,000 , he lost 55% of his money.
Also 50,000 was principal, there were interest defaults, those who chose monthly lost 4-5 months of interest.
Those who chose annual interest payment lost more and those who took option of interest at maturity, also lost 55% of their interest.

The peanut settlements were like:

Around 9.25% cash
5.55% as security receipt
And 30% as OCD / NCD type of security that too in escrow ( not in control of NCD holders ). These OCD and NCD again are long term suspicious objects handed over to original NCD holders without any security and safety.
So total would be just 45% that is finalized to be received back ( even that would take 3-4 years ).

For NCD who are having Axis Trustee:
https://srei.axist.in/
Link is valid till 31st March 2024 as notified by Axis Trustee.

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