JM Financial ARC plans recoveries worth Rs 1,000 cr in 18 months

Company added Rs 600 crore in assets in six months, as it makes recoveries from acquisitions earlier

JM Asset Reconstruction Company Ltd (ARC) plans to make collections worth Rs 1,000 crore through recoveries from stressed assets in the next 18 months and get back to growth after that.

The company added Rs 600 crore in assets in the last six months, but is still making recoveries from earlier acquisitions.

ARC also acquired some retail stressed loan portfolios, said JM Financial group officials in an analyst call. The company’s assets under management (AUM) stood at Rs 11,349 crore as of September 30, compared to Rs 11,405 crore at the end of June 2022 and Rs 10, 687 crore a year ago.

ARC was in the business of distressed credit, the sort of assets that went down in value during crises like the collapse of Infrastructure Leasing & Financial Services (IL&FS) in 2018 and the coronavirus pandemic in 2020 and 2021. ARC’s management decided to focus on recovery for these years. ARC wanted to ensure that it was not just adding assets but focused on collections as well, said company officials.

Cumulative recovery since April 2018 stood at Rs 8,515 crore, despite the uncertain macroeconomic environment post IL&FS situation and waves of Covid-19 pandemic, according to ARC’s presentation to analysts.

Through collections (recoveries) worth Rs 1,000 crore, ARC expects to reduce net debt to equity ratio almost down to a 0.5x level. At present total debt of the ARC currently was around Rs 2,100 crore and net worth was about Rs 1,730 crore. The company does not want to increase the ARC debt equity more than one-fold, officials said.

Besides taking bad loans on its books, it will also look at tapping into alternative funds for acquisitions. It is partnering with international funds and Indian companies for acquiring assets. The company’s contribution will be restricted to between 15 per cent to and 20 per cent.