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After buying assets worth Rs 4,600 crore in the year's first quarter, JM Financial Asset Reconstruction Company is readying for its next round of growth.
The plan is to infuse equity worth Rs 1,000 crore in the medium term, in phases, with Rs 500 crore to be raised over the coming quarters.
The capitalisation is healthy, with a net worth of Rs 330 crore and an overall capital adequacy ratio (CAR) of 47 per cent as on March 31. The net worth was Rs 280 crore and the CAR was 75 per cent in March 2013.
It is also planning to raise about Rs 250 crore through non-convertible debentures to finance operations. Rating agency CRISIL has assigned an 'A+\\stable' rating to the debentures.
The firm is likely to raise further equity capital of around Rs 500 crore over the next one to two years. The ability to raise equity will remain a key point for monitoring, said CRISIL
JM Financial holds a 49 per cent stake in the ARC, followed by 23.1 per cent held by four public sector banks, about 20 per cent with Narotam Sekhsaria and Suresh Neotia, and 7.9 per cent with Valiant Mauritius Partners FDI Ltd.
The company acquired assets worth Rs 4,660 crore in the first quarter and the securities receipts outstanding had increased to Rs 8,290 crore as of June 30. In an aggressive strategy, it had picked loans to Hotel Leelaventure Ltd from a lenders' consortium in July, paying Rs 846 crore or a little over 20 per cent of the total purchase value upfront to the lenders.
The ARC's earnings profile is volatile because of uncertain and erratic recoveries from acquired assets. It has, however, demonstrated a healthy recovery track record, which enhances its competitive position, said CRISIL.
The company reported net profit of Rs 48 crore in 2013-14 (it was Rs 40 crore the previous year), supported by strong growth in management fee income and interest income on restructuring.
It plans to increase the share of relatively stable fee-based income by managing an increased amount of trust assets, wherein a significant proportion of SRs are held by external investors, and launch of a distressed asset fund.
