Leading investment bank Edelweiss Capital is venturing into asset reconstruction business, for which it’s on the lookout for foreign partners. Edelweiss will soon apply to Reserve Bank of India for an ARC licence.
Meanwhile, Edelweiss has hired Siby Antony as executive vice-president of Edelweiss Alternate Asset Advisors, the company which will run the ARC busiuness. Antony was previously executive director at IDBI Bank, and will head the newly formed asset reconstruction.
Antony has played a vital role in setting up and running Corporate Debt Restructuring forum, where banks jointly resolved bad loans as well as Stressed Assets Stabilisation Fund (SASF), a pool in which IDBI’s Rs 9,000 crore bad loans got transferred.
ARC is registered with RBI as Secularisation or Reconstruction Company under the SARFAESI Act for the purpose of carrying on business of reconstruction of banks’ non-performing assets. The net non-performing assets (NNPAs) of private sector banks in fiscal 2007-08 rose by 54 per cent and those of public sector banks rose by 18.5 per cent.
There are also other players that are entering the ARC segment. Small Industries Development Bank of India (SIDBI) is planning an ARC unit which will be operational in next 4-5 months. SIDBI will hold 26 per cent stake in the company, while the rest is distributed among 10 public sector banks, LIC and two state finance corporations.
Kotak Mahindra Bank has also received RBI’s regulatory approval to set up an ARC unit and will completely own it, but will bring down its holding to 49 per cent as per RBI guidelines.
Reliance Capital also received a licence in February this year to set up an ARC. Others who have entered the business are ICICI-promoted Asset Reconstruction Company of India (Arcil), UTI-promoted ASREC India, IFCI-promoted ACE, and International Asset Reconstruction Company (IARC), formed by State Bank of India Chairman and telecom regulator M.S. Verma and former Bank of America CEO Arun Duggal.