Don’t miss the latest developments in business and finance.

Srei Infra CEO Rakesh Bhutoria resigns; salary issues persist

Srei Infrastructure Finance has suffered yet another blow as its CEO Rakesh Kumar Bhutoria resigned even as the company is going through the debt resolution process with the lenders

Srei Infra CEO Rakesh Bhutoria resigns; salary issues persists
Press Trust of India New Delhi
5 min read Last Updated : Sep 14 2021 | 5:17 PM IST

Struggling to retain its staff, Srei Infrastructure Finance has suffered yet another blow as its CEO Rakesh Kumar Bhutoria resigned even as the company is going through the debt resolution process with the lenders, sources said on Tuesday.

The pandemic induced lockdown severely dented the finances of the Kolkata-based NBFC, leading to an asset-liability mismatch.

Subsequently, the lenders of the company took control of its finances to recover their dues, triggering mass level exits at Srei Group, as salary delays became a routine, and remunerations of the top-level executives were capped at Rs 50 lakh per annum. The salary cap was removed in April this year.

"CEO Rakesh Kumar Bhutoria has resigned from Srei (SIFL). These top-level employees are now exploring the option of taking legal recourse for release of their salary arrears, which has been held by banks controlling the TRA (Trust and Retention Account)," according to the sources privy to the development.

Even as Bhutoria's last working day is yet to be decided, the sources said the company has appointed a headhunter to scout for a suitable candidate for the new CEO.

"The headhunter has shortlisted a list of potential candidates, and they have even met the board of the company, as part of the interview procedure," according to the sources.

The lack of decision making by the lenders in clearing salary arrears has led to the loss of professional talent, ultimately leading to the top-level exits, as they feel demotivated, said one of the sources.

More From This Section

The chief operating officer (COO) of the company's fully-owned subsidiary Srei Equipment Finance Ltd (SEFL) had left in April. The company secretaries of SIFL and SEFL had resigned in March and May, respectively.

"Recently, the Head of Treasury and Head of Corporate Communications have also left," the sources said, adding about 230-250 employees of the Srei group have resigned since December 2020.

Payment of salaries and other statutory payments have also been routinely delayed ever since the banks took action, they said.

When contacted, Bhutoria neither denied nor confirmed his resignation.

On arrears related to salaries, he said employees are left with no other alternative.

Bhutoria hopes that the matter will be resolved soon.

"The employees may take legal recourse to get back the portion of their salaries held back by the banks controlling the company's cash pool account.

Even as there has been an understanding with the banks to release salary dues, nothing has actually happened on the ground. Even as the salary cap was removed in April, nearly a dozen senior executives have not been paid their arrears amounting to nearly Rs 3 crore," according to the sources.

They said Srei and its board wrote to banks several times for the release of arrears, and overdue payments of provident fund and taxes.

"At the behest of the board, Srei has also intimated the regulator (RBI) about their grievances. They are now exploring possibilities of seeking legal recourse to get the employee dues released," said another person privy to the development.

Srei owes around Rs 18,000 crore to around 15 lenders, including Axis Bank, UCO Bank and State Bank of India.

Srei offered no comments about Bhutoria's resignation.

However, it said the company's total liabilities are around Rs 18,000 crore of bank loans, and another nearly Rs 10,000 crore of external commercial borrowings and bonds. Realisable assets, including arbitration awards, are higher.

"Therefore, we believe we can pay all our creditors over a period of time if structured in line with cash flows. Additionally, the company's business model is sustainable, and we serve one of the critical segments of the Indian economy - MSME and infrastructure.

"As a going concern, SEFL remains hopeful of receiving necessary support and guidance from the regulator and other stakeholders," a company spokesperson said.

The NBFC manages close to Rs 40,000 crore of assets. It has been facing difficulties in recovering money from its borrowers, who are mostly construction equipment owners and are also impacted by the pandemic.

"In order to pay back our lenders in a structured and orderly manner, the company submitted a scheme in October 2020 for paying back principal and interest over time to banks and financial institutions. The company also offered the option of modifying the proposed repayment schedule to be suggested by the creditors," the company said further.

On the capital raise front, the board of directors of Srei Infra (SIFL) had in July cleared a proposal to raise up to Rs 2,500 crore through various means, including qualified institutional placement (QIP).

Earlier, the subsidiary SEFL attracted investment proposals totalling Rs 4,200 crore from private equity firms from the US and Singapore.

Arena Capital (US) and Makara Capital (Singapore) are awaiting fit and proper criterion clearance from the Reserve Bank (RBI), the sources said.

Srei Infra reported a consolidated net loss of Rs 971.05 crore in the quarter ended in June 2021.

In 2020-21, it had posted a record loss of Rs 7,338 crore, against a net profit of Rs 89 crore in the preceding fiscal.

Srei had transferred its business to SEFL in late 2019 by way of a slump exchange through a business transfer agreement, in lieu of fully paid-up equity shares to SIFL.

Also Read

Topics :Srei infrastructureIndian companiesdebt resolution

First Published: Sep 14 2021 | 5:13 PM IST

Next Story