The Kotak Mahindra group, which has an asset reconstruction division, is toying with the idea of setting up a full-fledged asset reconstruction company in line with similar companies in the sector, instead of taking equity participation in any of the existing companies that were being floated. | |
| "We have an existing asset reconstruction division where we buy bad assets from banks and ailing companies at a discount and reconstruct them, ultimately selling it to a third party at a profit. |
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| "This is a profit making centre and we might consider changing this into a full fledged ARC," explained Uday S Kotak of the Kotak Mahindra group while talking to Business Standard. |
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| The asset reconstruction company would be floated in conjunction with other financial institutions, where the Kotak Mahindra Bank would be taking a majority stake. |
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| Non performing asset levels at Kotak Mahindra group's is however the smallest in the industry at 0.2 per cent with the highest capital adequacy ratio of 20 per cent. |
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| Having gathered experience in reconstructing assets from banks and the group was confident of floating an asset reconstruction company as a profit centre, said officials from the group. |
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| Kotak said the group's own team had the expertise to value sick assets and fix a discounted value for takeover from creditors. |
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| Several such deals had already been done with the division taking over assets from creditors and recovering expected value from the assets. |
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| The business was high risk but also offered high returns, said Kotak. He declined to name the sellers of sick assets as the latter were reluctant to be identified. |
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| The sale price for sick assets would have to attractive enough to offer returns of 30-40 per cent on the investment. Extension of this business would not be a problem given the skill already built up in-house. |
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