IndoStar Finance Capital offloads corporate loans to Phoenix ARC

Offloads stress loans with dues worth Rs 915 cr

IndoStar Finance Capital Ltd (ICFL) has divested a portion of its legacy corporate loan book, including credit with overdue amounts between 31 and 89 days totalling Rs 915 crore, to Phoenix Asset Reconstruction Company. This move is part of ICFL's strategy to refocus on retail asset books.

In a filing to the Bombay Stock Exchange (BSE), ICFL disclosed that the sale included accounts categorised under Stage 2, amounting to outstanding dues of Rs 915 crore. These accounts were resolved on August 25, 2023, at carrying value through an Asset Reconstruction Company (ARC) sale under the Swiss Challenge method.

As per the agreement, Phoenix ARC will establish a trust responsible for overseeing the progress of associated real-estate projects. The trust will also consider allocating funds to complete these projects.

This strategic arrangement allows IndoStar's management team to intensify their focus on expanding its core retail lending business.

Following the transaction, the share of retail lending in the company's assets under management (AUM) has risen from 85 per cent to approximately 95 per cent.

Given IndoStar's concentration on used vehicle financing over the past year, the yields on Commercial Vehicle (CV) disbursals have exceeded 18 per cent. This has incrementally raised the yield of the overall portfolio. The focus on used commercial vehicles has additionally resulted in reduced average ticket sizes of loans, which stood at Rs 7.6 lakh for the quarter ending June 2023 (Q1 FY24).

IndoStar reported a Debt-to-Equity ratio of 1.9x and a robust capital adequacy ratio of 34.4 per cent on a standalone basis for the same quarter. These metrics, along with adequate liquidity, position the company well for future growth, it stated.

(Phoenix ARC is a Kotak group entity. Entities controlled by the Kotak family have a significant holding in Business Standard Pvt Ltd)