Infrastructure News

NARCL seeks Rs 2,700-crore funds to grow bad loan biz, Infra News, ET Infra


The National Asset Reconstruction Co of India (NARCL), the state-promoter bad bank, is seeking to raise ₹2,700 crore in debt to expedite the purchase of stressed loans, said people with knowledge of the matter.

The ARC has initiated talks with private and government-owned banks to raise five-year debt, preferably in the form of non-convertible debentures (NCD). The ARC will use the funds to make cash payments to banks against the purchase of non-performing loans.

NARCL offers 15% of consideration as cash payment, and balance 85% is paid in the form of security receipts paid on recovery of loans or at the end of five years or whichever is earlier.

The fundraise would enable NARCL to acquire about ₹20,000 crore bad loans from banks.

NARCL did not respond to ET’s request for comments.

At present, the ARC does not have any debt on its books. “It is talking with existing stakeholders such as State Bank of India, Canara Bank, and Union Bank, which are likely to invest in the proposed debt,” said one of the persons cited above.

“NARCL has proposed a structure wherein it pays interest annually while principal debt will be bullet payment,” the same person said.

It has also agreed to maintain a one-year fixed deposit which is equivalent to the amount of the annual interest outgo on the proposed borrowing. Additionally, it is likely to put in place a cash-sweep mechanism where the recovery from bad loans will be used to repay the debt.

“Unlike most privately held ARC, NARCL is likely to attract investors for its proposed ₹2,700 crore debt due to government backing,” said a senior official from the ARC industry. NARCL has plans to acquire ₹2 lakh crore loans over a period of time to free banks from legacy bad loans. Until December 2023, the ARC had acquired around ₹58,400 crore of stressed loans. These include loans to Jaypee Infratech, SSA International, Helios Photovoltaic, Dharani Sugars and Parenteral Drugs, among others.

It has also emerged as the winning bidder for Simplex Infrastructure and SEW LSY Highways and has triggered a Swiss challenge auction for Pink City Expressway. It has also acquired Srei Equipment Finance and Srei Infrastructure Finance under the Insolvency and Bankruptcy Code route.

  • Published On Feb 16, 2024 at 02:00 PM IST

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