 "Hemant Kanoria")
In June 2014, when public sector lenders were still saddled with bad loans of Kingfisher Airlines as today, Srei India Global Competitive Fund, run by SREI Venture Capital, deposited close to Rs 650 crore in Karnakata High Court (which had a receivership of Kingfisher ) after realising close to Rs 500 crore as interest and principal from its loan to Kingfisher. In 2012, Srei had bought close to Rs 430 crore loans to Kingfisher from the books of ICICI Bank, leaving many observers questioning about the logic behind the deal. However, as things turned out, the value of underlying assets of the loan in the form of shares of United Spirits Limited (USL) soared, and Srei was able to realise its loans with interest. In an interaction with Namrata Acharya, Hemant Kanoria, Chairman and Managing Director, Srei Infrastructure, advises banks to "think logically" and make efforts to obtain funds of Kingfisher deposited in courts, while envisaging to protect the underlying assets. Edited Excerpts:
What made you invest in Kingfisher debt when banks were struggling to get rid of it?
We are in the business of giving loans, and ICICI Bank wanted to sell the loan. We thus got the loan from ICICI Bank. Basically, the deal was properly ring-fenced, and we got USL shares. After the USL open offer was made, the share prices went up, and we sold the shares.
What kind of returns you got from the Kingfisher deal?
As a financial institution, we were only entitled for interest and principal. The balance amount was deposited with the court.
What is your advice to banks who are now struggling with the Kingfisher loan?
The lenders have to see things in a right way. The public sector banks must first realize the money lying in various courts and escrow account. However, instead of doing that, a panic situation is being created. After realising whatever money is lying with the courts, the lenders can go for other methods of recovery. Basically, banks must think logically instead of panicking.
Aren't there multiple legal issues involved in realising money from courts?
I don't think so. The court can give banks the order to realise the money. As far as Srei is concerned, we have deposited the balance money with court after recovering our dues with interest. Our realisation was close to Rs 450-500 crore. Also, we were also a party to a particular case when Kingfisher had filed a court order against us selling the collateral. We took the legal course and the court gave us the order to sell the shares. Similarly banks can obtain court orders.
In 2015, there were reports that Srei was mediating between Vijaya Mallya and the consortium of lenders for one time truce. Did any such meeting happen?
No. We are basically lenders, and we have realised our money, and now we don't have anything to do with Kingfisher. However, our suggestion is to basically protect the assets. It is our basic philosophy, that whatever asset is created, be it roads or any other infrastructure project, it has to be protected. It should not be left languishing. If the money has not been realised, the first thing that is to be done is to protect the asset.
Srei arm recently launched a stressed assets fund. Is it inspired by Srei's success in the Kingfisher deal?
The fund will basically invest in stress assets that can be turned around. Srei's role will be to manage the funds, as we have the professional expertise to do so.
