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With banks increasingly insisting on 100 per cent cash payment for selling their stressed assets, Asset Reconstruction Company (India) Limited (Arcil) plans to float a ₹1,000-crore Alternative Investment Fund (AIF) to pony up the cash to buy them. Arcil and its AIF will co-invest for buying out these assets.
Capital constraints
The proposal to set up an AIF, which will collect funds from investors, comes in the backdrop of asset reconstruction companies facing capital constraints in picking up assets on full-cash basis.
Vinayak Bahuguna, MD and CEO, Arcil, emphasised that there is a clear opportunity to acquire the stressed assets of small and medium enterprises (SME) in the range of ₹50 crore to ₹150 crore from banks via all-cash deals.
India’s oldest asset reconstruction company will co-invest in these assets, along with the AIF, which will be in the nature of a debt fund. Arcil was set up in 2002.
“Having a portfolio of 10 to 15 assets in one fund makes sense. We will launch the fund, get it going, and then look to launch other funds,” said Bahuguna.
Aswini Sahoo, Chief Investment Officer, observed there are a large number of stressed SME assets that are not getting resolved.
“This is a large market. Nobody is focussing on stressed SMEs. Banks are taking these assets (via the Insolvency and Bankruptcy Process) to the National Company Law Tribunal (NCLT) and they are getting liquidated. Our AIF will be SME-focussed, aimed at reviving their fortunes,” explained Sahoo.
Arcil is taking the AIF route for raising funds for the first time. Its earlier two funds were set up under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
The ARC raised ₹258 crore under the Arcil Asset Reconstruction Fund (AARF)–I , the first dedicated fund in India for investing in bad loans acquired from banks and financial institutions, in 2007. In 2009, it raised its second AARF amounting to ₹191 crore.
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