ARCIL appoints Apitco as portfolio resolution agency

The Asset Reconstruction Company (India) Ltd (ARCIL) today appointed Apitco (formerly Andhra Pradesh Industrial and Technical Consultancy Organisation Ltd) as its third portfolio resolution agency in the country.

ARCIL will also increase its capital base from Rs 10 crore to Rs 100 crore by October 15 through issue of equity.

The new stakeholders are expected to be Punjab National Bank, Karnataka Bank, Karur Vysya Bank apart from existing stake holders like ICICI Bank Ltd, IDBI, SBI, HDFC Bank Ltd, Federal Bank increasing their stake.

ICICI Bank is expected to hold 30 per cent, SBI and IDBI around 19.5 per cent each, Punjab National Bank 10 per cent, Karur Vysya per cent and Citicorp 4.4 per cent, while the balance will be held by HDFC.

Federal Bank and the South Indian Bank Apart from Apitco which will be handling the portfolio of Andhra Bank, Arcil has appointed Industrial and Technical Consultancy Organisation of Tamil Nadu (ITCOT) and Usha Martin Finance as resolution agencies so far.

Under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act, 2002, ARCIL acquires financial assets (loans, guarantees, debentures and other funded and non-funded financial assistance with interest) for the purpose of making realisations and recoveries.

In order to resolve the non-performing assets (NPAs) it appoints portfolio resolution agencies.

The agreement was signed by S Khasnobis, president and COO of ARCIL and S Srinivasa Rao, managing director of Apitco. "Apitco will be handling 20 small accounts (each less than Rs 10 crore) amounting to a total of Rs 125 crore. Apitco shall be paid remuneration for acting as ARCIL's agent," Khasnobis added.

A time-frame of one year has been given to Apitco for recovery after which the period would be extended, subject to review. There is no penalty for non-recovery, Khasnobis said.

Apitco is the third agency after Usha Martin financing company and TIDCO to be appointed by ARCIL for portfolio resolution. Around 10 agencies are also being considered. ARCIL has reportedly acquired bad loans of close to Rs 400 crore from about 16 banks in the last couple of months.

Earlier, only ICICI Bank, SBI and IDBI, the promoters of ARCIL were selling their non performing loans portfolio to the company.

"By 15 October 2004, ARCIL plans to increase the capital from the present Rs 10 crore to Rs 100 crore. There will be new entrants in the form of Punjab National Bank, Karnataka Bank and Karur Vysya Bank apart from the old players like ICICI Bank Ltd, IDBI, SBI, HDFC Bank Ltd and Federal Bank," Khasnobis said.

"We have been making representations to the government to give permission for increasing FII (foreign institutional investors) stake to 49 per cent. Once it is done we expect good flow of capital from FII. The Indian entity of Citicorp has shown interest as of now," he said.

"ARCIL has acquired financial assets in Maharashtra, Gujarat, West Bengal, Rajasthan and Chhattisgarh. In Andhra Pradesh the stamp duty which is 0.1 per cent of transaction with a capital up to Rs 1 lakh, has been attractive. In other states like Tamil Nadu it is as high as 10 per cent.

Besides the issue of stamp duty, we also have problems in areas of FII stake and tax dispensation," Khasnobis added.