Arcil lines up rights to raise Rs 360 crore

Asset Reconstruction Company (India) Ltd (Arcil) is raising Rs 360 crore equity through a 1:1.2 rights issue at a premium.

Simultaneously, the country's leading asset reconstruction firm is also raising Rs 3,000 crore worth of debt to aggressively deal with stressed assets. The decision to raise equity and debt was taken at an Arcil board meeting last week.

Arcil acquires non-performing assets (NPAs) from the banking system and make profits by nursing them back to health.

Following the rights issue, Arcil's equity base will be raised to Rs 460 crore from the current level of Rs 100 crore. The proposed Rs 120 crore issue will carry a premium of Rs 20 per cent share. With a reserve of about Rs 30 crore, Arcil's net worth will go up to Rs 490 crore.

ICICI Bank, the main sponsor of the fund, holds 29.55 per cent in Arcil, while State Bank of India and IDBI hold 19.95 per cent each and Punjab National Bank 10 per cent.

The rest of its equity is being held by a clutch of banks and financial intermediaries including Housing Development Finance Corporation, Karnataka Bank, South Indian Bank, Federal Bank, Citicorp and a few others. ICICI Bank may choose to renounce its rights to subscribe to the issue and a foreign investor may walk in.

The Rs 3,000 crore proposed debt issue will be offered to domestic institutions and foreign institutional investors (FIIs) in the ratio of 51:49. Arcil plans to use part of its net worth to partially subscribe to the debt issue.

This "top up" or "underwriting" arrangement will fetch the issue investment grade from rating agencies and help Arcil place the debt in the market.

The debt issue will consist of security receipts (SRs) "" to be traded in market "" which Arcil issues against the recovered assets. They may carry a coupon of 9-10 per cent and mature in five years. An investor who wish to exit before five years can encash th security receipts at the prevailing net asset value (NAV).

Till now, Arcil has issues security receipts worth about Rs 4,000 crore to its own sponsors and other banks from which it has bought stressed assets. The Rs 3,000 crore proposed issue will be its first debt issuance in the market.

Thus far, Arcil has acquired 562 non-performing loans from 31 banks and financial institutions with total dues of Rs 21,144 crore.