Arcil FY19 recovery at 10-yr high

Bad-loan aggregator Asset Reconstruction Company India (Arcil) has managed to increase recoveries to the highest in a decade in FY19, aided largely by the sale of properties across the country.

The company now plans to diversify its business with new verticals, such as advisory for banks, and start a new $100-million distressed fund for small and medium enterprises (SMEs). It is seeking twice the rate of return on assets in the next five years.

“Despite the tough market conditions, especially in the property market, we managed to increase recoveries to Rs 1,100 crore from Rs 700 crore the previous year. This is the largest increase in 10 years and came from the sale of properties, bilateral settlements and restructuring,” said Vinayak Bahuguna, CEO, Arcil.

About 62% of these recoveries went back to banks from where these assets were bought in exchange of security receipts.

Arcil managed to sell more than 1,500 properties across the country last fiscal. About half of the recoveries came from selling large land parcels to end users, such as factory owners. Arcil’s profit increased 21% to Rs 149 crore in FY19 from Rs 123 crore a year earlier.

Bahuguna said that the company plans to increase recoveries to Rs 1,500 crore in FY20, mostly from asset sales in the busy season in the last quarter of the fiscal. Bahuguna has set an ambitious target of acquiring assets worth Rs 4,000 crore to Rs 5,000 crore even though so far in the first half of this year, only Rs 393 crore worth of bad loans could be acquired.

Its total assets under management are Rs 11,877 crore.

“We want to increase acquisitions, we have enough capital and our new shareholder Avenue is more than happy to co-invest with us. We have already done three or four deals of Rs 400 crore to Rs 500 crore,” Bahuguna said, referring to Avenue India Resurgence that acquired a 25.03% stake in the company.

“We will expand our revenue sources by getting into complementary fields – financing, advisory or IPR related, particularly with our technology products. We are in discussions with large financial institutions to manage their bad loan auctions, for example, for a fee. We expect to firm up some partnerships by March 2020,” he said.

The company expects new businesses to add up to 40-50% of overall revenues in five years, helping increase profits. Bahuguna said he expects to improve the company’s return on assets to 15% in five years from about 6.7% at the end of March 2019. On the cards is also a $100-million fund for investments into distressed SMEs.

Bahuguna also said that Avenue Capital is open to increasing its stake in the company and may be interested in buying IDBI Bank’s 19.18% holding, which is on the block.