Edelweiss ARC eyes stake sale, to raise around Rs 2,000 crore

Mumbai: With a large number of bad loans likely to be put on block by banks following RBI's asset quality review, Edelweiss ARC is bullish about its business and is gearing to have a war chest of around Rs 2,000 crore to cash-in on the expected boom in the sector.

Country's largest asset reconstruction company, which already enjoys over 40 percent market with an asset under management of Rs 25,000 crore, has been approached by a few offshore funds to buy into it and is looking at all proposals.

"So far, we could manage with the support from our parent Edelweiss Group. But with lot of assets likely to come in the market after Reserve Bank's asset quality review exercise, we will need to raise funds," Edelweiss ARC's Managing Director and CEO Siby Antony.

Its equity base stands at Rs 170 crore and in FY16 Edelweiss Group had infused Rs 900 crore in it.

Banks will be classifying more loans as dud loans in the outgoing quarter as the eight-quarter forbearance period is getting over by March end, and many banks, like SBI and ICICI Bank, have already said that their pains will linger into the March quarter too.

"With more bad loans to be put on sale next year, our requirement would be between Rs 1,000-2,000 crore," Antony said, adding they have to raise so much money in the fiscal.

He said with the enactment of Bankruptcy Code, there will be more demand from overseas investors to come and invest in the asset reconstruction space.

"Budget has brought in more clarity on Bankruptcy Code and we will see many foreign funds coming into the country," he said.

Notably, the Canada Pension Plan Investment Board had earlier this week announced that it would pump in USD 450 million through a specially created fund with the Kotak Mahindra ARC, Phoenix, which will invest USD 75 million, making the overall investment USD 525 million.

Many other foreign funds, like W L Ross, are reportedly keen on entering the domestic markets.

It can be recalled that the 37 listed banks alone added a whopping Rs 1 trillion in fresh NPAs between September and December quarter, taking the system level stressed assets to over 12 percent or Rs 4.34 trillion.