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The bankrupt SREI group has informed the stock exchanges that the externally appointed auditor has found fraudulent transactions to the tune of Rs 3,025.73 crores.
SREI started its operations in 1989 and has successfully offered solutions to its customers in Asset Finance & Leasing in the infrastructure sector. It was the most significant player in its segment. However, on 4th October 2021, the RBI superseded the Board of the companies and the group went into insolvency proceedings on 8th October 2021.
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In March 2022, at least 14 entities expressed their interest to acquire both distressed firms: SREI Equipment Finance Ltd (SEFL) & SREI Infrastructure Finance Ltd (SIFL). Some of the largest parties who showed interest were JM Financial ARC, Prudent ARC, Edelweiss ARC, Jindal Power, Arena Investors LP Ltd., and IRAC.
BDO India LLP (BDO or transaction auditor) is conducting an investigation into the affairs of the company (Srei Equipment Finance) in respect of transactions qualified under sections 43 to 51, and sections 65 and 66 of the IBC, 2016.
The report states that certain fraud transactions were undertaken by the company during FY20 & FY21 and the monetary impact of these transactions on it is Rs 2,512 crore, being the amount outstanding in the books of the company as of October 2021. Moreover, Rs 513.67 crore is the amount considered as due and outstanding towards notional loss to the company on account of fraudulently charging a lower rate of interest to certain parties.
“The Administrator of the Company received an initial report from the professional agency appointed as the transaction auditor, indicating that there are certain transactions which are fraudulent in nature, as per Section 66 of the Code,” the notice said.
Key lenders to SREI Infrastructure Ltd. include UBI, PNB, Canara Bank, Indian Bank, and Bank of Baroda, among others. Key lenders to Srei Equipment Finance Ltd. include Canara Bank, UBI, and SBI among others. Financial creditors have claims of Rs 10,727.5 crores and Rs 31,867.8 crores against SIFL & SEFL respectively.
Article by Aman Agarwal.
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