I don't see a revival in private sector investments: Srei's Sunil Kanoria

Kolkata-based Srei Infrastructure has stakes, either as a debtor or lessor, in at least two major stressed companies—Deccan Chronicle and Essar respectively, currently under NCLT.  Sunil Kanoria, Vice Chairman, Srei Infrastructure Finance Limited, in an interview with Ishita Ayan Dutt and Namrata Acharya, says why Srei cannot be considered as a related party in Deccan Chronicle and current state of affairs at Orissa Slurry Pipeline, which Srei had leased to Essar for transporting raw materials to its plants. Further, according to Kanoria, private sector investment is still far away as once companies come out of NCLT, they would use their existing capacity rather creating new. 

Your opinion on the (working of) the insolvency code in resolving the crisis in non-performing accounts (NPAs)?

The change in the law (to prevent promoters of firms undergoing insolvency proceedings from bidding for their own assets) created confusion. No committee of creditor (CoC) will hand over assets to promoters who wilfully defaulted. The earlier law gave CoCs the choice. So, why did we introduce an amendment, which brought in so many interpretations and created so much confusion?

When do you expect a pick-up in private sector investments?

I don’t see a revival in private sector investments for quite some time. There will be incremental growth but small. This is because most of the project finance institutions in our country have ceased to exist; the financial services sector is in disarray, which otherwise would have given momentum to private sector investments.  When firms start coming out of the NCLT (National Company Law Tribunal, which enforces the IBC), only then will existing capacities be used and there will be expansion.

Why was your bid for Deccan Chronicle rejected? How was your bid against others?

We were the highest bidder (Rs7 billion). We believe we had offered a fair value and it was certainly more than what others were offering. We are in an environment where many don’t want to take a decision. We got 56 per cent of (CoC) votes but the law requires a minimum of 66 per cent in favour of a transaction for it to happen. Hence, the bid got rejected. I believe, we must always attempt to ensure a business survives. If the final verdict is liquidation, many people will lose their job.

Are you in discussion with manufacturers like Bombardier and BHEL to become their leasing partners?

We believe leasing will become a key tool for asset creation in India and the new tax regime (goods and services tax) will help revive it. Leasing has its advantages. For instance, we had leased out an oxygen plant to a firm that went into bankruptcy. But, since our asset was leased, we never had a default. We continued to receive the monthly lease rental. 

In the case of the slurry pipeline, which is a lifeline for Essar, there was a problem?

The RP (resolution professional, appointed to run the insolvent entity) was looking to cancel the lease. In our opinion, that cannot be done because we own the asset. We have moved the court against it (the RP’s proposed action). 

Is the deal between NuMetal and Srei still on?

We no longer have an agreement with NuMetal. We are confident that as and when we are allowed to sell the asset, we will get a good value.

What is the current status of the Assam Company case?

I believe the bids have come but voting has not happened.

What role should the judiciary play in resolving bad loans?

When the Act was passed, I had said judges should participate in workshops and get trained to assess the implications of this law. One must realise that businesses can fail but entrepreneurship cannot. If entrepreneurship is not encouraged for fear of failure, that economy will not progress. Also, we need to create (legal) capacity. We only have the NCLAT (appellate tribunal) in Delhi, which handles NCLT cases from all over India.

What went wrong with the current policy approach?

We are always looking at the past and blaming everyone, penalising everyone. We are not moving forward. Take the power sector, where there was a problem because coal (allotted mines, by court order) was taken away and PPAs (power-purchase agreements) were missing. What one should have done was to make coal available and ensure PPAs get signed. That is something which is policy-led and not individual-dependent. 

You can punish an individual for deception or wilful default, but you should not punish the project or the asset. You need a good policy to ensure survival of the asset, since a lot of investments were made in creating it. Today, the entire machinery, including the judiciary, is only talking about skeletons. I am not saying don't punish the guilty but don't treat everyone as a criminal. Then, nothing good will come out.