Asset Reconstruction Company (India)

ARCIL operates across the country through a network of 13 offices across 12 states and employ 206 personnel at end March 2026. It has 218 registered valuers, 206 collection agents and had 988 lawyers empanelled. Since inception, ARCIL has worked with 32 private sector banks (including merged), two co-operative banks, 28 public sector banks, 51 non-banking financial companies, 18 housing finance companies and seven other selling institutions (four insurance companies and three financial institutions). The company has created the required infrastructure including teams, processes, branches and technology.

ARCIL operates across all three business verticals - Corporate loans, SME and Other loans and Retail loans. AUM has increased at a 3-year CAGR of 11% to Rs 20149 crore at end March 2026 over March 2023. The company had acquired Rs 89909 crore in total principal debt at a cost of Rs 44114 crore or 49.07% of the total principal debt and had made recoveries of Rs 31915 crore.

Banks and financial institutions typically sell stressed assets through a competitive bidding process. The trusts under ARCIL raises funds from various qualified buyers (QBs) to invest in security receipts, with a minimum investment requirement of 15% of the transferors? investment or 2.5% of total receipts. The trust purchases stressed assets, which are assigned through an agreement, and undertakes asset reconstruction via resolution plans. Money realized from assets is distributed to investors based on their holdings. Acquisitions occur through cash, co-investor, ordinary, and structured receipts, each generating different fees and income types.

The various resolution strategies are employed for stressed asset recovery, utilizing methods like IBC compliance, mutual settlements, debt restructuring, and asset sales via SARFAESI and DRT. As a technology-driven firm, ARCIL has implemented an IT infrastructure for scalable operations, using proprietary platforms for asset tracking and due diligence, including borrower history and asset valuation.

Phanindranath Kakarla, is CEO&MD of the company and Pramod Gupta is CFO. The company is promoted by Avenue India Resurgence Pte (an affiliate of Avenue Capital Group) (holding 69.73% shareholding) and the State Bank of India (19.95%). Avenue Capital is a global investment firm headquartered in New York and is focused on specialty lending, opportunistic credit and other special situations investments in the United States, Europe and Asia.

A capital adequacy ratio is robust at 65.31% at end March 2026.

The Offer and the Objects

The initial public offer (IPO) consists entirely of offer for sales (OFS) of 5.27 crore equity shares to raise Rs 696-733 crore with price band of Rs 132-139 per equity share of face of Rs 10. The promoters, Avenue India Resurgence Pte is selling 2.5 crore equity shares and State Bank of India 1.1 crore equity shares.

The promoter shareholding in the company will decline to 78.67% post- IPO from 89.68% pre-IPO.

Among the selling shareholders, Lathe Investment Pte is selling 1.6 crore equity shares and The Federal Bank 0.1 crore equity shares through OFS.

The issue is to be made through the book-building process and will open on 09 September 2026 and will close on 11 September 2026.

The Company expects that the listing of Equity Shares will enhance visibility and brand and provide liquidity to its existing Shareholders.

Strengths

ARCIL is India?s First ARC to start operation in 2003. It is the second largest ARC in India in terms of AUM, profitability as well as net worth. As the first ARC in India, ARCIL has gained insight into the regulatory landscape, diversified portfolio across different loan categories positioning it well to address stressed assets in India.

ARCIL has have developed expertise in acquiring stressed assets and follow a disciplined acquisition process with a view to acquire lower risk portfolios.

ARCIL benefits from extensive branch networks, collection agents, and relationships with banks and financial institutions, facilitating the acquisition of stressed assets.

ARCIL has focused on having a greater share of the security receipts issued for the stressed assets acquired, which reflects in higher share of investments and risk appetite for these assets.

The IBC has significantly enhanced the insolvency resolution landscape in India, favoring creditors and bolstering potential as resolution applicants.

By engaging local recovery agents and adhering to the RBI?s Fair Practice Code, ARCIL ensures an efficient debt recovery while upholding professionalism, with a network of 218 valuers and 988 empaneled lawyers.

Company had credit rating of ICRA ?AA- (Stable)? and Crisil ?AA- (Stable)?. The recovery rating (RR) of security receipts for 87.58% of AUM was rated RR2 and better.

ARCIL intends to increase the proportion of Retail and SME and Other loans in its portfolio. RBI?s new expected credit loss provisioning framework is likely to trigger further sale of stressed assets in the retail and MSME segment.

The evolution of the ARC industry along with an evolving regulatory framework have made ARCs one of the preferred modes for stressed asset resolution, providing growth opportunities which it is well positioned to capitalize on.

Weaknesses

A significant portion of revenue is derived from management fees/ trusteeship fees charged by for managing stressed asset portfolios and from investments into the stressed asset portfolios.

AUM growth depends on stressed asset acquisitions, increased competition from ARCs, stricter regulations, redemption rates of SRs, the financial condition of banks selling stressed assets etc.

The company has to source and acquire a sufficient amount of stressed assets at appropriate prices to generate sustainable revenue.

The sourcing of stressed assets is dependent on various factors beyond control of the company, including changes in economic conditions, competition, value, quality and type of stressed assets and ability to access sources of funding.

The timely recovery of outstanding amounts from stressed assets is critical, as delays or failures in recovery can adversely impact business and cash flows.

The stressed borrowers may be in precarious financial situations, affecting their repayment capabilities. Economic downturns can further aggravate issues with underlying collateral value.

The strategies available for resolution of Retail Loans and SME and Other loan portfolio are limited as compared with corporate loans.

Non-redeemed SRs after eight years are treated as losses, which accounted for 34.94% of AUM at end March 2026.

The necessity for recovery ratings influences management fees and investment valuations, making the quality of AUM and compliance with timelines crucial for financial stability.

A significant portion of stressed assets are under corporate loans business vertical representing 68.75% of AUM at end March 2026.

There is no readily ascertainable market price for the stressed assets, necessitating a careful evaluation of recovery expectations, collateral values, and borrower profiles

Maintaining and upgrading IT systems timely and cost-effectively is crucial for competitiveness.

The changes in laws and regulations may impose further compliance burdens.

The business is subject to seasonality with increased activity during the fourth and second quarter as financial institutions sell stressed assets on their books before the end of full and half year to improve asset quality.

Recent trends show gross non-performing assets levels of large borrowers in banks has significantly declined from 14.3% in FY2019 to 1.2% in FY2026, limiting the availability of stressed assets for ARCs.

Failure to identify, monitor, and manage risks can adversely impact business and financial health.

The business is capital-intensive and requires funds for acquiring stressed assets.

The asset reconstruction industry in India faces significant challenges, such as the emergence of alternative frameworks for stressed assets, a decline in corporate NPAs leading to reliance on retail assets, and legal delays impacting recovery efficiency.

Valuation

ARCIL has delivered subdued and volatile financial performance and profitability, though the performance has been relatively better compared with other ARCs. Its profit after tax on a standalone basis as a percentage of Average AUM was highest at 2.22% and return on assets was also highest among top 7 ARCs at 11.73% in FY2025. ARCIL has recorded the lowest expenses on a standalone basis as a percentage of average total AUM at 0.68% for FY2025 among the top 7 ARCs in India. The net profit grew at a CAGR of 7% from Rs 288.6 crore in FY2023 to Rs 351.69 crore in FY2026. The revenue from operations declined to Rs 721.69 crore in FY2026 from Rs 809.19 crore in FY2023.

The EPS on post-issue equity for FY2026 works out to Rs 10.8. At the price band of Rs 132 to Rs 139, P/E works out to 12.2-12.8 times of EPS for FY2026. Post IPO M-cap is Rs 4516 crore at upper price band.

Post-issue, the book value (BV) will be Rs 91.0. The scrip is being offered at price to BV multiple of 1.5 times at the upper price band.

ARCIL is India?s pioneer asset reconstruction company. It the first pure-play ARC to list on the stock exchanges.

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