Avenue Capital Group, a New York based investment firm is in advanced talks these days to invest Rs. 1000 crores i.e. $145 million in Arcil – Asset Reconstruction Co. India Ltd for best part stake. The Avenue Capital acquires the stake from IDBI Bank, SBI and Punjab National Bank. Avenue Capital was founded by billionaire Marc Lasry in the year 1995 and now it has five offices in Asia and the firm has managed its assets which are estimated at about $9.6 billion.
The primary focus of Avenue is to invest in a distressed debt and other special situations investments in Asia, Europe and US. According to its website, it has approximately $9.6 billion assets on 30th June 2018. This New York based investment firm has $9.6 billion assets under management.
Arcil is India’s largest and one the oldest companies in the segment. In the year 2008, GIC, Singapore’s sovereign wealth fund picked up to 10% stake in Arcil. Arcil is said to be India’s leading asset reconstruction company (ARC).
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According to the Avenue Capital’s Asia strategy they have focused on Hong Kong, South Korea, China, India, South East Asia, Australia and Singapore. To leverage the opportunity best, funds will need to participate through an ARC structure.
As bad loans have piled up in the Indian banking system, several global financial institutions have established a local presence. In addition to that, with the Insolvency and Bankruptcy Code (IBC) in place, the bad loan resolution process is set to speed up fast, thereby raising the prospect of a surge in business for ARCs.
Gross non-performing assets (NPAs) or bad loans of Indian banks stood at Rs 10.3 lakhs crore on March 31 which was then extended to Rs 1.4 lakhs crore from RS 8.86 lakhs crore on December 31, 2017.
“As IBC starts settling down with more success stories, interest from global funds, investors will keep increasing,” said KPMG’s head of resolutions and restructuring Manish Aggarwal. To leverage the opportunity best, funds will need to participate through an ARC structure. Hence the interest in either acquiring stakes in existing ARCs or setting up a fresh, he said.
In recent months, however, funds have been out rightly buying distressed assets put up for auction by ARCs such as ARCIL. An example is W.L Ross & Cos $38-million buyout of the OCM business a few months ago. W.L Ross has significant interest in both steel and textiles in the US, and the move to acquire OCM, according to executives, was intended to bring in synergies with its operations overseas. Lehman Brothers, in contrast, purchased Spectrum Power in an ARCIL-organized auction process, to increase its play in the sector.
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