New Document top_band
 
Business Standard

Arcil to float risk capital fund to infuse equity in NPA cases

Related News

While bad loans pile up on the books of banks, getting equity assistance for revival and turnaround of units is becoming more difficult. As a step to give timely capital support to viable companies that are non-performing assets, asset reconstruction company plans to float a risk capital fund.

Besides professional guidance, equity assistance to promoters (of these units in the Arcil portfolio) can help turn around and improve recoveries, according to , the 2002-founded company’s new chief executive and managing director.

Arcil has begun talks with financial investors for floating funds. The corpus could be Rs 100 crore, he said, but declined to name the prospective investor. Based on experience with the proposed funds, Arcil could decide later on the corpus size in the future.

Arcil is promoted by banks and financial institutions. Its key stakeholders include (19.95 per cent), (19.18 per cent), (13.26 per cent) and (10.01 per cent).

Asset reconstruction companies () can also extent a limited amount of credit support. Arcil could provide a maximum credit of Rs 15 crore in each case. It would extend assistance only in two or three cases.

Referring to business performance in 2011-12, Rudran said acquisitions — buying out bad loans from banks — were less.

The assets under management declined to Rs 6,000 crore in end-June 2012 from Rs 6,780 crore a year ago.

An analyst said the disagreement between ARCs and banks over price of loan portfolios is one of reasons for drop in acquisitions in 2011-12 financial year.

ARCs acquire bad loans from banks at a mutually agreed price. They then recover them from the loan borrowers; these form their earning. ARCs can directly buy assets from a lender by paying cash or issue security receipts (SRs) to purchase them.

While banks want a direct cash transaction, most ARCs insist on SRs, analyst pointed out. SR is a security that is subscribed by qualified institutional buyers including banks. When an ARC recovers loans, it repays money to SR holders.

Asked if company would set a new fund to finance NPA purchases, the Arcil chief said it currently had no such plan. It has reserves of about to Rs 1,300 crore, a part of which would be used to make cash purchases.

Arcil had raised Rs 1,300 crore through two funds in the past. It has committed entire corpus of these funds for business.

Read more on:   
|
|
|
|
|
|
|
|
|

Read More

RBI says open to revisiting priority sector lending norms

Even though the final guidelines on priority sector lending (PSL) was released over a fortnight ago, the Reserve Bank today said it is open to ...

Quick Links

News Rss icon

LIC Housing Finance takes over Orbit Corp's Mumbai property

Orbit's total amount outstanding is Rs 95.50 crore including interest, expenses and other charges

VCES a rare opportunity, make fresh start, says Chidambaram

The FM asked hose in trade and industry to seize the offer

Govt allows greater flexibility for pension fund investments

But the EPFO board would need to approve the changes before they become official

Back to Top