| Plans to raise Rs 360 crore through rights issue.
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| Asset Reconstruction Company India (Arcil), the country’s first entity engaged in purchase and settlement of bad loans, today reported 610 per cent rise in net profit in 2005-06.
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| The country’s first entity engaged in purchase and settlement of bad loans resolved 52 per cent of total dues during the year.
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| Arcil’s net profit in 2005-06, the second year of its operation, was Rs 30.83 crore against Rs 4.34 crore a year earlier.
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| During 2005-06, completely exited 64 cases with total dues of Rs 2,010 crore and recovered and distributed Rs 827 crore to investors in its security receipts. The rate of return for the investors was 34 per cent.
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| It acquired 562 non-performing assets (NPAs) from 31 banks and financial institutions involving total dues of Rs 21,144 crore in 2005-06.
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| To fund its growing business, Arcil shareholders today also approved a rights issue of 12 crore shares of Rs 30 each to raise Rs 360 crore. After the issue, Arcil’s net worth would increase to Rs 478.70 crore.
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| Arcil said enhancement of capital base would enable it to augment fund raising for cash acquisition of NPAs from the banking system.
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| Arcil has been buying bad loans against issue of security receipts to banks selling the assets. With increased preference among banks to sell their bad assets for cash, Arcil will need to increase its leveraging capacity to keep growing.
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| The net profit for 2005-06 translates into a return on equity of 31 per cent and has declared a maiden dividend of 12 per cent for 2005-06, which will entail into an outgo of Rs 100 crore. During 2005-06, Arcil’s total income was Rs 61.33 crore, up from Rs 13.87 crore a year earlier.
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| Arcil expects accretion to the banking sector’s distressed assets to continue. In the US around 1 per cent of the loan book is written off every year.
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| As the economy is on a rapid growth trajectory, CAGR of credit growth is expected to be in the range of 20 per cent to 30 per cent and this may increase fresh flow of NPAs.
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| ICICI Bank is the largest shareholder in Arcil with a 29.58 per cent stake. State Bank of India and IDBI Bank have 19.95 per cent stake each, Punjab National Bank 10 per cent, Citicorp Finance 4.40 per cent and the balance is held by several other banks. |
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