Lenders look to offload stake in assetreconstructioncompanies
Lenders try to free up capital ahead of the launch of the ‘bad bank’
MUMBAI: Lenders have started looking for buyers for their stakes in asset reconstruction companies (ARCS) to free up capital for the launch of the National Asset Reconstruction Co. Ltd (NARCL), the ‘bad bank’ they will jointly own.
In February, state-run Punjab National Bank (PNB) put its entire 10.01% stake in Arcil, one of India’s oldest ARCS with assets worth ₹12,000 crore under management, for sale.
This was followed by private lender IDBI Bank, which, too, has begun looking for a buyer to sell its 19.18% stake to Arcil.
Similar talks are underway to divest ownership in ASREC (India) Ltd, a Mumbai-based ARC. On Thursday, three public sector banks—union Bank of India, Indian Bank and Bank of India—said they jointly intend to sell up to 88.4 million shares, constituting up to 90.31% of the total equity share
Security receipts issued
by ARCS
Security receipts completely redeemed
Graphic: Sarvesh Kumar Sharma/mint
capital of ASREC.
SBI Capital Markets Ltd (SBI Caps) has been mandated as the sell-side adviser for the transaction.
It has stipulated that a potential bidder “should have a net worth of not less than ₹100 crore or should have assets under management of not less than ₹500 crore”.
Experts said the move by lenders is in keeping with their investment plans in NARCL, which is expected to assume a much wider role in the cleanup of bad assets in the banking system.
According to RBI data, 7.5% of all bank loans had turned bad by the end of March 2021.
“With NARCL coming into being, the major positive feature is that it will not face the
problem of aggregating debt, a problem that ARCS have been facing for a long time. Now, they will be able to do debt recasts as there will be no other lender who will have contradictory views. As an asset reconstruction company, we face such problems because 100% debt aggregation is not taking place,” Pallav Mohapatra, chief executive of Asset