Kotak's ARC to raise Rs 300 cr from abroad

Kotak Mahindra Group’s asset reconstruction business arm, Phoenix ARC, is set to raise a global fund of Rs 300 crore from investors abroad.

The target was a Rs 600-crore ARC fund, Rs 300 crore from abroad and Rs 300 crore from the domestic market. In July, it made its first closure after getting commitments worth Rs 167 crore from the domestic market. Sharadkumar Bhatia, CEO, said, “We have started the process of fund-raising from global investors and talks are on. We have received good response from domestic investors.”

He says fund-raising is tough in today’s scenario. “ARCs need capital to acquire assets and fund-raising is the only option. The recovery record of ARCs remains the most important factor.” Though there were a lot of non-performing assets (NPAs) in the system due to a mismatch between banks’ selling price and ARC companies’ buying price, fewer deals were happening nowadays, Bhatia added.

Phoenix ARC is looking at investments in the small and medium enterprises sector, where the company expects to close two deals by the end of 2010. Bhatia refused to disclose details.

Some more ARC companies are busy fund-raising in the backdrop of a rise in bad assets. The combined NPAs of public sector banks were Rs 57,301 crore in 2009-10, up by 30 per cent from 2008-09.

Ashvin Parekh, head of financial services at Ernst and Young, said, “There are adequate investors in global and domestic markets who are satisfied with the performance of Indian ARCs. The investors are also convinced of India’s growth story, which brings a better fund-raising environment.”

Another finance major, Edelweiss Capital, is raising a $400-million (Rs 1,800 crore) distressed assets fund through Edelweiss Alternate Asset Advisors, the alternative investments arm.

Other institutions engaged in the ARC business include ICICI-promoted Asset Reconstruction Company of India, the ADA Group-promoted Reliance ARC, Pridhvi Asset Reconstruction and Securitisation Company, UTI-backed ASREC India Ltd, IFCI-promoted Assets Care Enterprise Ltd and International Asset Reconstruction Company.