Arcil plans to acquire Rs 2,000 cr of bad loans in FY14

In FY13 Arcil, it acquired bad loans worth Rs 741 cr compared with below Rs 100 cr the previous fiscal

Asset Reconstruction Company (India) Ltd, or Arcil, is planning to acquire bad loans of about Rs 2,000 crore this financial year. In 2012-13, it acquired bad loans of Rs 741 crore, against about Rs 100 crore in 2011-12.

“We look forward to acquiring assets (bad loans) of about Rs 2,000 crore. This was our target last financial, too. We could have achieved that target because cases were available. But we preferred to consolidate and grow in a calibrated manner,” P Rudran, managing director and chief executive, told Business Standard.

In 2012-13, Arcil had bought two-thirds of the assets through cash, and a third by way of security receipts. “Last year, our recoveries were also satisfactory. With non-performing assets (NPAs) increasing in the banking system, we expect greater momentum in our business in the coming days,” Rudran said.

SNAPSHOT

• Arcil isn’t looking at big-ticket assets, dues for which are about Rs 500 cr
• In FY13, Arcil acquired bad loans of Rs 741 crore, against Rs 100 crore in FY12
• In FY13, it had bought two-thirds of the assets through cash and a third via security receipts
• In FY13, Arcil had bought NPAs at 40-45 per cent of their worth, against 25-30 per cent earlier
• Of the 14 asset reconstruction firms, 5-6 are very active, largely on small, medium accounts

He agrees the prices for buying bad loans had risen in recent times. “Earlier, sales were not taking place, primarily on account of pricing issues. But now, we are witnessing greater convergence on this. Last year, since NPAs were increasing, banks wanted to see reduction in these. That continues to be the case this year, too. For us, pricing for acquiring these assets has gone up and room for error is reducing. But we are ready to negotiate, as we see business at that price, too,” he said.

Industry sources said in the last financial year, Arcil had bought the NPAs at 40-45 per cent of the worth of the loans, against 25-30 per cent earlier. “The assets we had acquired last year were basically in the upper end of micro, small and medium enterprises,” said Rudran.

He added with continuous growth in bank NPAs, Arcil would have good acquisition opportunities this year. “As far as individual accounts are concerned, we are not looking at big-ticket assets, dues for which are more than Rs 500 crore, considering their nature and time required to resolve them,” he said.

In recent years, competition in the asset reconstruction sector has intensified. “Now, competition is really tough because there are 14 entities, of which five-six are very active, largely on small and medium accounts. Considering the market size in terms of NPAs available for sale, I do not think more asset reconstruction companies are required at this point,” Rudran said.