In a significant development in India’s banking sector, a consortium of investors, including the notable Asset Reconstruction Company India Limited (Arcil), has expressed interest in acquiring the distressed assets of IDBI Bank, amounting to a staggering ₹8,842 crore.
Investor Consortium and Their Interest
Arcil, backed by Avenue Capital, leads a group of around twelve investors, including Aditya Birla ARC, Invent ARC, Omkara ARC, ASREC, UV ARC, Alchemist ARC, Phoenix ARC, and Prudent ARC. These entities have shown preliminary interest in the acquisition of IDBI Bank’s bad loans. This pool of distressed assets is spread across 12 accounts, notable among them being VOVL, Jaiprakash Associates, and Wind World India.
Details of the Distressed Assets
The bad loan portfolio, which these investors are vying for, includes a diverse range of accounts. VOVL, part of the Videocon Industries group, is the largest account in the pool, with a debt of ₹4,584 crore. It’s followed by Jaiprakash Associates at ₹1,836 crore, Wind World India at ₹748 crore, and Metalyst Forgings at ₹446 crore. Other notable accounts in the mix include Pink City Expressway, McNally Bharat Engineering, Metenere, GTL, The Jeypore Sugar Company, MBL Infrastructures, and Aravali Infrapower.
Bidding and Sale Process
IDBI Bank has initiated the process to sell this portfolio, and interested investors had until November 28 to submit their Expressions of Interest (EoIs). So far, eight of these investors have submitted their interest. Following this, the lender is expected to call for firm bids for the bad loan pool.
Arcil’s Background and Role
Arcil, incorporated in 2002, is a significant player in the asset reconstruction sector in India. Avenue Capital acquired a substantial 27% shareholding in Arcil in 2018. The company, which specializes in purchasing bad loans from banks and non-bank lenders, has assets under management (AUM) of around ₹12,000 crore. Since its inception, Arcil has resolved over ₹78,000 crore worth of non-performing assets (NPAs) acquired from Indian banks and financial institutions.
IDBI Bank’s Strategic Divestments
In line with its strategy to divest non-core assets, IDBI Bank, controlled by the Life Insurance Corporation of India (LIC) and State Bank of India (SBI), has been actively seeking to reduce its non-performing ratios. The bank has also recently sold its 23% stake in IDBI Federal Life Insurance for ₹507 crore, continuing to hold a 25% share in the insurer. Additionally, the bank is reviving the sale process for its asset management company, IDBI Mutual Fund, estimated to fetch around ₹200 crore and is planning to sell part of its 26% stake in NSDL.
Conclusion
This collective move by Arcil and other investors to acquire IDBI’s bad loans reflects the growing interest in distressed assets in India’s banking sector. It also underscores the efforts of financial institutions like IDBI Bank in cleaning up their balance sheets and focusing on core banking operations. The outcome of this sale will be a significant indicator of the market’s appetite for such distressed assets and the evolving landscape of asset reconstruction in India.