Core Health assets on the block next week

Four Firms in fray

Asset Reconstruction Company of India Ltd (ARCIL) is all set to put Core Healthcare, India's first securitised company, on the block. The sticky assets of the Ahmedabad-based pharmaceutical company will be auctioned next week.

ICICI Ventures is in the race to pick them up, besides drug makers Cadila Healthcare, German multinational Freznus and the US-based Baxter.

The company's assets comprise large volume parenterals, medical devices and a power plant. Their value, however, could not be ascertained. The prospective buyers have already done a due-diligence of the facilities.

Senior ARCIL officials said, "We would like to sell the assets of Core Healthcare either fully or on a piece-meal basis. This is first auction of bad assets and we hope to put more sticky assets on the block soon."

Renuka Ramanath, CEO ICICI Ventures, was not available for comments.

The primary lenders to the Core Healthcare were State Bank of India, ICICI bank, Industrial Development Bank of India, Unit Trust of India, Dena Bank, State Bank of Travancore, State Bank of Mysore and a clutch of foreign banks including Citibank.

ARCIL has bought sticky assets worth over Rs 8,700 crore thus far from banks and financial institutions but the company faces a severe dearth of investors in these assets.

Typically, in most markets FIIs are predominant investors in junk assets but in India FIIs have not been permitted in this category. In the absence of investors, banks and institutions that sell off the sticky assets themselves are subscribing to the security receipts issued against it.

From the banks' point of view, the assets then merely move from the asset side of the balance sheet to the investment side. These investments are accorded 'standard non-SLR' status but comes with the burden of provisioning and the cost of the receipts itself.

ARCIL has had to lower its target of buying out assets thanks to the absence of investors. It scaled down its target from Rs 20,000 crore this financial year to Rs 15,000 crore.