ICICI Bank teams up with Apollo to set up ARC

With the banking sector buffeted by bad loans, the country's largest private lender ICICI Bank today said it has teamed up with private equity major Apollo Global Management to launch an asset reconstruction company.
ICICI and Apollo have signed a memorandum of understanding to set up the ARC, which will acquire debt from lenders and also take equity stakes in borrowers, a bank statement read.
AION Fund, which has been established through a strategic partnership between ICICI Venture Funds Management Company and an affiliate of Apollo Global Management, is the third party in the MoU.
The fund has already committed USD 825 million in investments in the country.

According to RBI, gross non-performing assets of scheduled commercial banks rose to 7.6 per cent in March 2016 and may increase further to 8.5 per cent in 2016-17 as per a base-case scenario.
With asset stress resolution taking the spotlight, the government and the regulators have been making efforts to relax conditions by allowing up to 100 per cent foreign investment in ARCs, subject to conditions.

This has led to many new entities showing interest.
ARCIL, promoted by a slew of lenders including ICICI Bank, used to be the only ARC in the country, but in the last few years, companies promoted by private financial institutions like Edelweiss Finance and Kotak Mahindra Group have come up and have been playing a key role.

The proposed ARC, the statement said, is counting on ICICI Bank's experience in the Indian financial sector and Apollo's investment experience as the strong points.
"The objective of the collaboration will be to streamline the operations of borrowers, facilitate deleveraging and arrange additional funding on a case-by-case basis," it said.