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Retail bondholders hard up for cash during the pandemic are facing uncertainty as the Kolkata bench of National Company Law Tribunal has recently allowed Srei Equipment Finance Ltd (SEFL), part of the Srei group, a moratorium on repayments from 1 January to 30 June.

The Kolkata-headquartered company has proposed to make repayments to various categories of debenture holders over an extended period. Retail investors will receive the interest accrued during the moratorium within 15 days of it ending, but many say that they cannot wait till then.

Debaprasad Ash, a 78-year-old retiree from Kolkata, sold his Srei group’s bonds last week for half of what he had initially invested. There are several other retail investors who are now stuck without interest on their debentures of the non-bank financier.

“I was lucky enough to get 100,000 from the sale and could not have waited any longer because of financial commitments. For retired people like us, it’s not a very pleasant situation," Ash said.

Financial advisors had advised him to exit earlier but he chose to wait longer, which he now regrets, Ash said. “Better late than never." he said.

Apart from bank loans, the company has outstanding market-linked debt instruments to the tune of 499 crore, including the money put in by retail investors.

Deb Kumar Sur, a 34-year-old mechanical engineer, said that his father had invested a part of his retirement corpus in Srei bonds in 2017. Sur, who had taken out some money in between, still has over 4.5 lakh in bonds, the series where default occurred on 11 January.

“Given what has been happening in corporate deposits and other debt instruments, I am in the dark about the outcome after six months. However, we have been getting regular interest payments over the last few years," said Sur, who also lost some money in a corporate fixed deposit of a real estate company earlier.

The arrangement, Srei said on 31 December, is a “natural consequence" of the first scheme that SEFL proposed with banks and financial institutions and is pending before the NCLT.

Mint reported last month that lenders were unable to vote on the group’s proposal to consolidate its lending business into SEFL on 23 December after they were informed a day earlier that the chairperson for the meeting had recused himself. This was the second day of voting after lenders rejected Srei’s proposal on 16 December.

ABOUT THE AUTHOR

Shayan Ghosh

Shayan Ghosh is a national writer at Mint reporting on traditional banks and shadow banks. He has over a decade of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions worth of toxic assets.
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