Arcil aims to raise $300 million from sceptical overseas investors

Asset Reconstruction Company of India Ltd (Arcil) is planning to raise around $300 million from overseas investors by the year-end.

Overseas investors expect returns which may be difficult to achieve as banks want to sell assets at higher price.

The state-run Arcil hasn't raised capital for the past five years. The money to be raised could be either in its own books or part of a fund to be promoted by it.

"We have not frozen (capital raising plan). Maybe by the end of the year we would take a call. We are exploring whether it would be a part of the balance-sheet or whether it would be part of a fund. So depending on the structure, it would be anywhere between $100 million and $300 million. Once we decide by the year-end, we would put it before the board," Vinayak Bahuguna, CEO and managing director, said.

Arcil has a capital base of Rs 1,500 crore but it hasn't raised money for the past five years.

"If we raise as a fund, we would be little more ambitious. And if it's within balance sheet, we have to worry about returns on equity and dilution," he said.

Raising overseas funds, however, is a tough call as foreign investors would be expecting return not being generated considering the price at which banks want to sell their stressed assets in India, Bahuguna said.

"We have to convince (investors) that market for right pricing is available. As of now I don't believe that market is ready."

This explains why Arcil has been conservative in buying bad assets even as burden of stressed assets continue to grow in the economy.

ARCs acquired Rs 7,000 crore during the first half of current year, of which Arcil bought just less than Rs 500 crore.

"We're willing to buy more provided the prices make sense commercially. After all, we have to give returns to our shareholders. So, there's a bit of a struggle."

Arcil's conservative attitude, however, is not shared by many.

Last year, Edelweiss emerged as the biggest with Rs 20,000 crore of asset under management against Arcil's Rs 11,000 crore.

"There are not different views but there are different business practices."

Bahuguna urged banks to be more realistic in pricing of their bad assets.

"Expecting a high price for stressed assets only postpones the problem as eventually price of that NPA would fall to more reasonable level," he said.

Refusal of banks to sell NPAs to ARCs with growing options before them to restructure loans rather than selling them is another reason why Arcil's business in not growing.

"The sellers are not coming forward in larger number, particularly for large accounts because of opportunities like strategic debt restructuring or 5/25 scheme," he said.