SREI Infrastructure Finance

July 2018 Crdeit Rating update of Srei Infra provides good information and financial ratios (like RONW, ROA and NPA) of the company which are not mentioned in Annual Report 2018.
http://www.careratings.com/upload/CompanyFiles/PR/Srei%20Infrastructure%20Finance%20Limited-07-06-2018.pdf

Disclosure: Not Invested. Tracking.

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Thanks for the credit rating doc Harshit , its useful.
The price seems to be moving in the opposite direction to the fundamentals and I dont see any reason for it. The co has had many missteps in the past but the last 4 qtrs performance is pretty good.The promoters seem to have learned their lessons and now seem focused on monetising assets and improving ROE. Also leasing is a big opportunity where banks I think are not allowed to compete.

Disc: Invested at 54 and adding on further drops

I am getting conflicting numbers for non-performing assets of the company. Below look at page 41 from fy18 annual report of the company and Care rating write-up provided by @harshitgoel

Also Annual report mentions calculated on “Total Assets”. I am perplexed - Is the method of calculating NPA still not standardized?

CARE Ratings gave NPA of 2.31% for FY18 and Loan Book is Rs. 31645 cr, so NPA amount works out to be Rs. 730 cr.
Annual Report FY18 gave NPA of 1.75% on Total Assets and Total Assets are Rs. 41507 cr., so NPA amount comes Rs. 727 cr.
Both the amounts are approximately same, so this could be one possible reason for difference in percentage figures. The same figures match for FY17 also.

Regards
Harshit

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From where did you take loan book number? Is this gross loan or net loan?

2b946c96-7571-4693-adb0-b709baeab77f.pdf (470.5 KB)

NCLT Order:

  • SREI is allowed to join the CoC of Deccan Chronicle for NCLT Insolvency Proceedings.
  • Resolution time period extended for the time taken for judgement (approx 6 months)

https://www.bseindia.com/xml-data/corpfiling/AttachHis/821a0ddb-6f47-4a43-8f11-20d502811b47.pdf

  • Good article on this:
  • Out of 11,000 Cr debt, SREI has claim of 300 Cr (secured, seems bought from RBL Bank and JM ARC), so if voting is propotionate then it gets 3% voting rights in CoC.
  • SREI’s Vision India Fund (highest bidder) wanted to pay only 800 Cr (90% haircut?). They are re-structuring proposal now. Got 55% vote, ICICI biggest lender (10%) rejected it. Zee second highest bidder, other bidder is Times group. All bids much higher than liquidation value!!

Thesis of operating and financial leverage with lower NPA’s playing out well with a fantastic set of Q2 numbers. Stock should have a sharp reversal at these levels - 0.5x trailing price to book for a co. with ~13.5% RoE - means a 3.8x annualized P/E ratio at these levels.

Disc. Invested

I could not find NPA numbers. Can you please help?

Thanks

I don’t think they have released NPA numbers yet, although I am sure NPA’s have decreased looking at the loan loss provision release at the Standalone level, and lower provisions at consolidated level despite higher AUM. We should get to know tomorrow once the investor presentation is released ahead of the earnings call.

As per their latest concall, they believe that they can garner around Rs. 2,000 cr by selling their 25% stake in SEFL. This implies a value of Rs. 6,000cr for their 75% stake in SEFL, post IPO. Even if we give a 50% holding company discount, still it comes to Rs. 3,000 cr. The current market is at 20% discount to even this. I have not even factored the value of standalone business, which if even valued at book value is worth ~3,000 cr. Are we missing something? It looks too good to be true.
Disc: Invested

SJ

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One of the group companies reffered to NCLT.
https://www.cnbctv18.com/market/stocks/heres-how-bharat-road-network-created-networth-before-ipo-765311.htm/amp?

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Are the gross NPAs much higher as per the latest presentation? - https://www.srei.com/sites/default/files/SREI-Investor-Presentation-with-SEFL-June18-numbers-FINAL-for-investors--compressed.pdf

Yes. As per the latest presentation reported GNPA figures for FY18 are at 7.81% of total assets based on IND AS accounting system. Though this number has reduced to 5.94% in Q1FY19 it’s substantially high in comparison to earlier numbers reported based on IGAAP accounting system.
Management explained the difference in both the accounting systems in Q1FY19 concall, but they did not explain it properly regarding the difference in amount of provisions.

Regards
Harshit

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SILENCE is golden? Sure hope so :sweat_smile:
Most boards have fallen silent since almost exactly a year now.
Things that bad?
Isn’t it the best time to find VALUE? :slightly_smiling_face:
Or is it that millennials do not invest in shares anymore? :flushed:

Announcement missing most relevant details
– What was the loan amount which was sought to be recovered?
– Why was 94% holding sold for 40 Lakhs when the company has 1 acre in Lutyen’s Delhi?
– How come buyer is an IT company from Kolkata?

Transaction pertaining to invocation of pledge of equity shares (constituting 93.5 per cent
shareholding) of Nurit Properties Private Limited (formerly Evershine Buildcon Private
Limited

https://www.bseindia.com/xml-data/corpfiling/AttachLive/201a4bcf-26f5-4975-8553-9ec296e62820.pdf

Maybe a Sarada kind of company? :unamused:

They are very kindly volunteering to buy back their crashing NCDs. Seems made up :frowning:
The market regulator doesn’t generally discriminate between different sets of investors during a buyback.

The trigger is just one-level downgrade of NCD? Why so Serious? :clown_face:
Panic? Loss of Trust? :exploding_head:
https://trendlyne.com/onwards/?url=https://www.business-standard.com/article/companies/rating-for-srei-infra-finance-downgraded-for-debentures-from-aa-to-a-119091200092_1.html

It looks like I might have been mistaken about the quality of SREI.

PS:
Addendum to the post above, the sale of pledged shares for 0.5 Cr is possibly only because networth has been evaluated about 18 months prior to deal as 0.9 Cr, it indeed might have been quite low at the time of deal, we just have to trust the auditors here :wink:

PPS:
hope Bandhan merges with SREI, would diversify the whole entity :thinking:

Q2 results con call had management saying Q3 has already started showing improvements.
transcript: srei con call q2 fy20.pdf (162.9 KB)

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Srei Infrastructure, the holding company of Srei equipment finance, is looking to exit infrastructure finance business over the next three years due to a lack of business opportunities in the segment. The company, which started as an equipment financing firm, is going back to its roots, positioning itself as a leading equipment financing firm.

SREI NCDs seem to be much better and back to July 2019 levels though only half-way to the fall seen since September 2018. I looked at the ones which were most frequently traded, SREIBNPNCD-NL and SREIBNPNCD-NJ and SREIBNPNCD-NP in decreasing order of frequency.

Looks like another double-bottom pattern formed in past 4 months, 8 years after the beginning of this thread on the same observation!

Q3 results are as expected.
QoQ PBT up 7%, PAT up 8%.
YoY PBT down 37%, PAT down 35%.
Further commentary only expects this upward trend to continue.
Estimate the full recovery to peak results of FY2019 to be made in little over a year. (pace depending on overall macro recovery)

Media release:
https://www.bseindia.com/xml-data/corpfiling/AttachLive/5091080b-01d4-4f71-a214-3927584e5baf.pdf

Results:
https://www.bseindia.com/xml-data/corpfiling/AttachLive/c892d87a-fe56-4f32-bf6c-5867afa2a1ae.pdf

PS:
Can anyone comment on SIFL spinning-off SEFL? I see this as trying to clean books of SIFL by turning it into a holding company, so that it can raise funds more easily, since SEFL now owns all liabilities etc.
Also, maybe in a year or two, SEFL finally gets listed, un-locking value as planned more than a year ago.
Any ideas about how can NPA level be found out for an NBFC?
Found it! In the investor presentation for Q3.
Link: https://www.srei.com/storage/app/uploads/public/5e4/b7e/086/5e4b7e086669d388825510.pdf

I estimate 2.5% NNPA in Q3, looks like some aggressive provisioning!

Seem like ok guys! The reorganization is stuck, not all lenders have approved. Construction is partially back on track (public works) and rest is likely soon enough, eastern region is less affected, except their home state of Bengal seems to have some hotspots, not extraordinary overall.

Credit rating already got downgraded to BBB+ from A- (in Feb, before moratoriums announce, which perhaps is a negative for them?) and is still on watch, roughly 10% NNPA reported and leverage of 6x noted, which means half of book can evaporate any time.

Disc: Averaged past few weeks. 3% of PF.

PS:
Somehow institutional holding peaked in Sept 2019 at 17% (if BNP Paribas is also counted they collectively owned little over 20%), though biggest holder Fidelity has reduced to half its holdings from 8% to 4% since peak in 2017.
What changed since Q2 then, to make a drastic decline by almost half by next quarter?
Holding company discount after restructuring is a big factor likely.
Maybe it looked historically cheap and oversold before they realized that trading at 10% of BV and PE of ~1, something has to be seriously wrong here? (well of course Corona made a drastic reduction too, by further half since Q3)
Somehow stock remained unaffected by their sales in Q3.