Srei Infrastructure Finance Ltd on Monday announced a scheme of amalgamation that will help list its equipment finance business on the stock exchanges, thereby shelving an earlier plan to launch an initial public offering (IPO).
However, the IPO appeared to be in jeopardy after IL&FS Financial Services defaulted on its debt payments and triggered fears of a liquidity crisis in the broader non-banking financial company (NBFC) space in India.
Now, through a three-stepped amalgamation scheme, Srei Infrastructure said in a stock-exchange filing that it will de-merge the equipment finance business. It will get 10 shares of wholly-owned subsidiary Srei Asset Reconstruction Pvt. Ltd for every 21 shares it holds in Srei Equipment.
Srei Asset Reconstruction, which has applied for a name change to Srei Asset Finance, will seek a listing through the scheme and every shareholder of Srei Infrastructure will get five shares of Srei Asset for one share of Srei Infra.
“Instead of the IPO, the shares of equipment finance business will list on the stock exchanges through the scheme of amalgamation announced today. The company seeks various approvals, including clearances from shareholders and regulators. The whole process may take about six months to one year,” said a spokesperson for Srei Infrastructure.
After the amalgamation scheme is concluded, the promoter holding in Srei Asset will stand at 69.45% while the balance 30.55% stake will be held by public shareholders.
Srei Infra will also infuse Rs 500 crore in capital into the equipment finance firm to grow its balance sheet, the company said.
“(The) decision (amalgamation) will lead to substantial increase in net shareholders' fund and allow shareholders of Srei to directly hold shares of both the infrastructure finance and the equipment finance businesses,” Srei Infrastructure’s chairman and managing director Hemant Kanoria said in the stock-exchange announcement. “The move is value accretive for our shareholders as they will have monetisable assets in form of listed shares of both the businesses.”
Shares of Srei Infrastructure shot up after the stock-market announcement to eventually end at Rs 34.65 apiece on the BSE on Monday, up 3.28% from the previous close. The stock has traded to a high of Rs 102.70 and low of Rs 25.40 in the last 52 weeks. BSE's benchmark Sensex advanced 0.53% to close at 36,578.96 on Monday.
Sharp & Tannan, an international chartered accountant firm, advised Srei on the share entitlement ratio based on its valuation report to the company. ICICI Securities was the sole merchant banker that offered fairness opinion on the share entitlement ratio to Srei Infra.
Srei Equipment Finance Ltd is registered with the Reserve Bank of India (RBI) as a non-deposit taking NBFC. It offers loans to help purchase a wide spectrum of assets including construction and mining equipment, information technology equipment and solutions, besides healthcare and farm equipment.
VCCircle had reported in March 2017 that Srei Equipment was looking to float an IPO worth Rs 1,800 crore for which it had shortlisted merchant bankers. The IPO comprised a fresh issue of shares worth Rs 1,100 crore, besides a secondary market sale of 4.38 million shares by the parent entity SREI Infrastructure.