Asset Reconstruction Company of India (Arcil) has announced its plans to launch a $600 million fund to invest in distressed bank assets, reports Economic Times. Arcil's managing director and CEO S Khasnobis has been quoted as saying that 20% of the fund will be contributed by the company only. The rest of the amount will be raised from domestic and foreign investors.
The funds will be used to buy non-performing assets (NPAs) from banks, which are rising in the current economic climate. NPAs will rise in the coming months from sectors like housing, exports, textiles, gems and jewellery and logistics as these sectors have faced the impact of slowdown.
Arcil currently has Rs 10,000 crore assets under management. Its shareholders include State Bank of India, IDBI Bank, ICICI Bank, Lathe Investment, First Rand Bank and Barclays Bank.
Investing in distressed debt is an increasingly lucrative opportunity for private equity and hedge funds this year globally. The funds can look to pick up debts and then later become equity owners at substantially lower valuations. According to a report, private equity and distressed debt specialists have raised about $26 billion since the start of October last year.
Players in India have also started to recognise this opportunity. Investment bank Edelweiss also formed Edelweiss Alternate Asset Advisors (EAAA), a distressed assets arm, with an initial target corpus of $200 million last year. The firm has also hired Siby Anthony from IDBI Bank to spearhead this initiative. There are also other asset reconstruction firms like UTI-led ASREC, IFCI-promoted Assets Care Enterprise (ACE), Dhir & Dhir, International Asset Reconstruction Company and Pegasus Asset Reconstruction Company.