IndoStar Capital invites counterbids to sell Rs 357 cr of stressed loans

Brookfield and Everstone-backed IndoStar Capital Finance has invited counter bids by August 26 from interested asset reconstruction companies (ARCs) for acquiring Rs 356.78 crore of stressed commercial real estate and used commercial vehicle loans through a Swiss challenge auction.

The middle-layer non-banking financial company (NBFC) has received a Rs 275 crore offer from an ARC for the stressed assets put up for sale. This offer will serve as the base bid for the Swiss challenge auction to be conducted by the NBFC. ARCs interested in submitting counterbids have to bid at least 15 per cent higher than the base bid.

The Mumbai-based shadow lender intends to complete the sale of the stressed assets by August 27.

According to the notice issued by IndoStar Capital, the base bidder intends to set up a special purpose trust – Securitisation Trust – for acquiring the stressed assets and will contribute 13.05 per cent of the security receipts (SRs) being issued by the Securitisation Trust. And, the balance 86.95 per cent of the security receipts being issued by the Securitisation Trust will be issued to IndoStar Capital as part of the consideration for the sale of the stressed assets. The base bidder has provided a plan to resolve the stressed assets and redeem the SRs issued by the Securitisation Trust within five years from acquisition of the assets.

SRs are instruments issued by ARCs as payment for purchasing distressed assets from banks or NBFCs. SR represents an interest in the underlying distressed asset or pool of assets.

Meanwhile, IndoStar Capital has also specified that any ARC, who was already in discussions to acquire the assets up for sale and had not submitted a proposal or submitted a proposal that was less beneficial than the base bid, will not be allowed to participate in the Swiss challenge process.

If IndoStar Capital does not receive any counter bids by August 26, it will execute the sale process with the base bidder. However, if multiple counter bids are received, the highest valid bid will be taken as the ‘challenger bid’ and the base bidder will be asked to match or exceed the bid. If the base bidder matches or surpasses it, they will be declared as the ‘successful bidder’. Otherwise, the challenger bidder will be the successful bidder.

IndoStar Capital Finance, with an asset under management of Rs 8,000 crore, focuses on small-time customers mainly in Tier-II, Tier-III, and Tier-IV towns, offering a comprehensive range of financial products including commercial vehicle, construction equipment, farm equipment loans. Previously, in December 2023, the NBFC sold a Rs 292 core stressed loan portfolio, consisting of SME loans, to Encore Asset Reconstruction Company as a step to clean up its books.