Axis Bank to buy over 13% stake in ACRE from IFCI at Rs 22 cr

ACRE, an asset reconstruction company, is engaged in the acquisition of assets (NPAs) from banks/FIs and their resolution

Axis Bank, the country’s second-largest private sector lender, is set to buy stake in Assets Care & Reconstruction Enterprise (ACRE). The lender is looking at picking up 13.67 per cent stake in the asset reconstruction company (ARC).

In a notice to exchanges, Axis Bank has said the share purchase agreement with IFCI for buying stake has been completed. “Axis Bank has signed a share purchase agreement with IFCl for acquisition of 7.32 million equity shares (13.67 per cent of total outstanding shares) of face value of Rs 10 per share in ACRE from IFCl at Rs 31 per share, resulting in a total cash consideration of Rs 22.72 crore,” said the notice.

However, the transaction is subject to approval from the Reserve Bank of India. The bank has indicated it expects the deal to be completed by January 2017.  
 

While IFCI is the second-largest shareholder in ACRE, with 19.34 per cent stake, the largest shareholder is SSG Capital Management (Singapore), with 49 per cent stake. Some of the other shareholders are Punjab National Bank, Tourism Finance Corporation, Bank of Baroda, Life Insurance Corporation, United Bank of India and Madhya Pradesh Consultancy. At the end of FY16, ACRE had total assets of Rs 336 crore and total income of Rs 35.9 crore.

Recently, ICICI Bank - another private sector lender - too had announced it had tied up with private equity firm Apollo Global Management and Aion Capital Management to set up an ARC in India. 

Despite the time taken by ARCs to resolve bad loans has been at an average of four-five years, even as some pressing issues over price with banks remain, several players have been showing interest in this business. Experts believe this stems from the total gross non-performing assets in the banking sector at the end of FY16 being Rs 5.41 lakh crore (7.43 per cent of total advances). That, they say, spells opportunity for ARCs.