Asset Reconstruction Company Submits Development and Homebuyers' Protection Registration Application to Securities and Exchange Board of India for Initial Public Offering
India's first asset reconstruction company, Asset Reconstruction Company (India) Limited (ARCIL), has taken a significant step forward by filing its Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) for an Initial Public Offering (IPO). This IPO is structured as an offer for sale (OFS) from existing shareholders, including Avenue India Resurgence Pte. Ltd, State Bank of India, Lathe Investment Pte. Ltd, and The Federal Bank Limited.
Established in 2002, ARCIL operates across three business verticals: corporate loans, SME and other loans, and retail loans. The company has been steadily growing and is currently the second-largest ARC in India by assets under management (AUM), managing stressed assets worth approximately ₹16,852.6 crore as of March 31, 2025.
For the fiscal year ending March 31, 2025, ARCIL reported total revenue of about ₹623.4 crore, profit after tax (PAT) of ₹355.3 crore, and a PAT margin of 57%, indicating strong profitability. The IPO is managed by merchant bankers IIFL Capital Services Limited, IDBI Capital Markets & Securities Limited, and JM Financial Limited.
The IPO comprises an offer for sale of up to 105,463,892 Equity Shares of face value Rs 10 each. The proceeds from the IPO will go entirely to the selling shareholders, not ARCIL itself.
ARCIL's financial strength is highlighted by a strong balance sheet characterized by a net worth of Rs 2767.798 Crores on a standalone basis and Rs 2663.141 Crores on a consolidated basis, as of March 31, 2025.
The company has formed a total of 652 trusts, with 199 closed and 453 open, as of March 31, 2025. In FY25, ARCIL acquired Rs 3975.871 Crores in total principal debt, made recoveries of Rs 28,459.7 crores, and had an AUM of Rs 16,852.570 Crores.
The company's management team includes professionals like Pallav Mohapatra, Phanindranath Kakarla, Pramod Gupta, Rajat Agarwal, and Anup Satish Mittal. ARCIL operates across 12 states in the country and collaborates with various entities such as registered valuers, collection agents, and empanelled lawyers.
The stressed assets opportunity is shifting from corporate to non-corporate loans, with the retail segment experiencing rising stress levels, according to a CRISIL Report. Notably, ARCIL completed its first stressed asset acquisition in December 2003, and only 4 ARCs have met the criteria of having Net Owned Funds in excess of the regulatory requirement as set by RBI, as on 31 March 2024.
The AUM of Retail loans have grown from Rs 1559.107 Crores as of March 31, 2023, to Rs 2747.88 Crores as of March 31, 2025, at a Compound Annual Growth Rate (CAGR) of 20.79%. ARCIL had the highest profit after tax as a percentage of average AUM at 1.94%, the highest return on assets at 11.48%, and a capital adequacy ratio of 99.03% in FY24. The company recorded the lowest expenses as a percentage of average total AUM at 0.57% among the top 7 ARCs in FY24.
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- The securities market in India witnessed a significant move with the filing of the Draft Red Herring Prospectus (DRHP) by Asset Reconstruction Company (India) Limited (ARCIL) for an Initial Public Offering (IPO), structured as an offer for sale (OFS).
- The proposed IPO will see existing shareholders, such as Avenue India Resurgence Pte. Ltd, State Bank of India, Lathe Investment Pte. Ltd, and The Federal Bank Limited, selling their equity shares, with ARCIL itself not gaining from the proceeds.
- In the realm of banking and finance, ARCIL has established itself as the second-largest ARC in India by assets under management (AUM), with a significant portfolio of stressed assets worth approximately ₹16,852.6 crore as of March 31, 2025.
- Despite the potential challenges in the investment market due to inflation, ARCIL has shown robust financial performance, reporting a total revenue of about ₹623.4 crore, profit after tax (PAT) of ₹355.3 crore, and a PAT margin of 57% for the fiscal year ending March 31, 2025.
- The future of ARCIL's business seems promising, as it continues to expand its operations across 12 states in India, collaborating with various entities in the finance sector, and capitalizing on the shifting stressed assets opportunity from corporate to non-corporate loans, particularly in the retail segment.
