Asset books of Indian asset reconstruction companies (ARCs) are set to register a significant growth, thanks to the rise in banks’ retail non-performing assets (NPAs) this year.
While International Asset Reconstruction Company (IARC) expects to double its retail asset portfolio this year, Asset Reconstruction Company of India (Arcil) estimates its portfolio, which was zero last year, to touch Rs 600-700 crore.
According to sources, some leading banks such as ICICI and Standard Chartered have approached IARC to sell their retail NPAs and buy stake in the company. "IARC added about Rs 58 crore of retail assets last year. This year, the company will add at least Rs 40-60 crore of retail assets, which will double the retail asset book," a company official told Business Standard.
"Unlike last year, this year IARC has seen a large number of banks proposing the company to sell their retail assets for recovery. IARC is yet to take a call on how much of the retail assets are to be acquired from these banks," the official added.
Interestingly, the banks, which have proposed IARC to acquire their assets, have also evinced interest in picking up stake in IARC. Source said that ICICI Bank and Standard Chartered were eying 9 per cent each in IARC.
According to RBI norms, a bank is not allowed to buy more than 10 per cent in an asset reconstruction company.
"Not only Indian banks, IARC has also received proposals from a number of foreign banks for their assets," the official said.
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At present, IARC's assets under management (AUM) stand at Rs 500 crore. Driven by the increase in banks' NPAs, the company would enhance its AUM to Rs 1,500-2,000 crore by March 2009, they said.
The company would hold its board meeting next week to decide on the quantum of assets to be bought from the banks.
Arcil's Managing Director and CEO S Khasnobis said, "We are looking at an acquisition of about Rs 2,500 crore of assets this year, out of which about Rs 400 crore has been added in retail assets alone over the last six months. We believe, about 25 per cent of our acquisitions will be retail assets. Last year, we did not have any retail asset in our acquisitions."
"Although we do not see any significant change in the corporate loan portfolio, the retail sector clearly looks to be under stress this year. The retail assets acquired by us mostly comprise mortgage loans, while vehicle loans contributed only Rs 20-30 crore. We have bought assets of five new banks during the last quarter," Khasnobis added.
As of March 2008, Arcil's AUM stood at Rs 10,000 crore. The company has earmarked a 25 per cent growth in its AUM this year.
"Our portfolio has about 60 banks, including State Bank of India, ICICI Bank, Punjab National Bank, Barclays Bank and Citicorp, the non-banking financial arm of Citibank," Khasnobis said.