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Arcil

ARCIL has helped resolve financial issues at SPIC by auctioning properties to raise funds and selling SPIC's 52.5% stake in a joint venture for $350 million. This money will be used to restart a fertilizer plant. ARCIL specializes in resolving non-performing assets (NPAs) and has helped multiple banks recover billions of dollars in bad loans over the past decade through acquiring and restructuring distressed assets. However, current RBI guidelines limit banks' ability to fully benefit from selling loans to ARCs.

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119 views9 pages

Arcil

ARCIL has helped resolve financial issues at SPIC by auctioning properties to raise funds and selling SPIC's 52.5% stake in a joint venture for $350 million. This money will be used to restart a fertilizer plant. ARCIL specializes in resolving non-performing assets (NPAs) and has helped multiple banks recover billions of dollars in bad loans over the past decade through acquiring and restructuring distressed assets. However, current RBI guidelines limit banks' ability to fully benefit from selling loans to ARCs.

Uploaded by

komal_soni_4
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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LIVE CASES

ARCIL comes to SPIC’s rescue


• Overview: SPIC had invested around Rs 165 crore as equity in the Jordanian
venture, which mines rock phosphate and produces phosphoric acid.

The $170 million Indo-Jordan Chemicals Company is a joint venture between SPIC,
JPMC and the Arab Investment Company (TAIC)

• ARCIL has undertaken a massive clean up of the finances at SPIC. It has sought the
auctioning of SPIC's fifteen properties to raise funds
• SPIC owes its creditors close to Rs 2,900 crore
• Objective: To restart the closed fertilizer plant of SPIC
• Action Undertaken by ARCIL: It has signed a memorandum of
understanding (MoU) to sell the 52.5% stake in Indo-Jordan Chemicals
Company (IJCC), a subsidiary of Spic for around Rs.350 crores

The joint venture partner — Jordan Phospates Mines Company bought


back the stake held by SPIC

Money raised from this exercise would be utilised towards restarting the
fertiliser plant in Thoothukudi, in south Tamil Nadu

• SPIC had mandated investment banker Rabo Bank to find a suitor for the
stake in IJCC and was expecting Rs 400 crore to Rs 500 crore from the
sale.
• Assets Details

These assets include a part of SPIC's building at Anna Salai and a godown
in Royapuram with land asset of nearly 90,000 sq; a 20,000 sq ft guest
house on 1.82 acres; a 4,000 sq ft commercial property at a prime
location in Bangalore; and lands in Tirunelveli and Madurai.

SPIC first knocked the doors of BIFR (Board for Industrial & Financial
Reconstruction) and subsequently the corporate debt restructuring cell
(CDR) after its attempt to make petrochemical products turned too costly
and debt overhang swallowed the entire net worth. ARCIL stepped in,
syndicated SPIC's debts and also sought board representation to restart
operations.
Andhra Bank , Oct 2004
• Arcil acquired 20 assets aggregate principal
outstanding of Rs 40 crore
• the small asset portfolio scheme
• March 2005 : recovered cash of Rs 6.5 crore
(45 per cent of the acquisition price of the
portfolio)
• At the end of March 2009, there were over one lakh sick SMEs with
an outstanding due amount of over `3,600 crore, according to official
data.

Recently, two public sector banks, Central Bank of India and Punjab
and Sind Bank, announced sale of distressed assets, a staggering
`3,500 crore in the case of the latter.
•
Neeta Mukherji, president and chief operating officer of Asset
Reconstruction Company of India, said Arcil has acquired bad loans in
the region of Rs 12,000 crore in the financial year 2010 against Rs
5,200 crore in 2007. She was speaking at a seminar on ‘unlocking NPA
through asset reconstruction’ organised by Dickenson Associates.
2007
• Arcil acquired bad debts worth :
• Rs11,209 crore from ICICI Bank ( majorly bad
home loans )
• Rs5,051 crore from State Bank of India,
• Rs2,848 crore from IDBI
• Rs1,290 crore from Punjab National Bank
2008
• Bank of India : acquisition of non-performing
assets worth about Rs250 crore.
• Key insights:
• Domain expertise and special empowerment of ARCs enable ARCs to understand
and find a way out through the complexity of the system, rendering them more
efficient in NPA recovery compared to banks
• Banks having capabilities and skills related to NPA recovery can enter the segment
of NPA management by establishing dedicated units at par with ARCs
• Inability to inject funds for restructuring of the defaulting business units, if
warranted, emerged as the major shortcoming of ARCs compared to banks
• The existing RBI guidelines regarding sale of assets to ARCs are conservative and do
not permit banks to book profits arising out of sale of loans in case of SRs. This
emerged as a major hindrance for banks going for NPA recovery through the ARC
route.
• Banks prefer a clean exit over the security receipts option as the former provides
instant liquidity by removing bad assets from the balance sheet and also releases
capital. Moreover security receipts have longer and uncertain repayment periods

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