Srei Infra moves regulators for buyback of NCDs from retail investors

Says buyback will prevent market operators from trying to get investors to sell their holdings at a deep discount, and will also make the exit route simpler

Srei Infrastructure has requested Securities and Exchange Board of India (Sebi) and Reserve Bank of India (RBI) to allow buy back of its non-convertible debentures from retail investors.

In a letter to both RBI and Sebi, Srei has said that, “At Srei we would be happy to on tap buy back our NCDs from retail investors as it would prevent interested parties from gaming the system at the expense of investors; offer investors a simple exit route, which would make NCDs more popular among retail investors,” said the letter written by Hemant Kanoria, chairman, Srei Infrastructure to both RBI and Sebi.

According to sources, “the company was apprehensive that a section of market operators have been trying to approach retail investors to sell their existing NCDs at a deep discount, which has prompted Srei to write to the market regulators.”

Recently, Brickwork Ratings had downgraded the Srei’s NCDs, perpetual debt instrument and commercial paper programme aggregating to Rs 5,327.07 crore.

The market regulator doesn’t generally discriminate between different sets of investors during a buyback.  

Notably, since 2012, Srei Infrastructure has raised close to Rs 2,148 crore in Srei Infrastructure Finance and Rs 2,167 crore Srei Equipment Finance.

Srei’s last NCD was in the months of April and May, when it raised about Rs 106 crore, with coupon rates of 10-11 per cent.

Srei also shelved its most recent NCD, which was supposed to be open between August 19 and September 18, with interest rates up to 10.65 per cent. The company had said the overall NCD programme as covered by the shelf prospectus was to raise an amount up to Rs 1,700 crore. In this tranche however, the company was seeking to raise Rs 100 crore from the issue with the option to retain another Rs 400 crore in case of over-subscription.

According to Brickwork SIFL was downgraded considering the decreasing asset base, weak asset quality due to weak credit profile of the portfolio, significant decrease in profitability in Q1FY20 due to increasing interest cost and higher provisions, declining capital adequacy ratio, continued high gearing against an expectation of significant reduction in gearing through capital infusion and liquidity stress faced by NBFC sector affecting the borrowing capacity of the company.

However, the rating continues to derive comfort from the experience of the promoter group in the line of infrastructure financing and equipment financing businesses, established market position and brand name and adequate liquidity profile.