Arcil to float Rs 500-cr fund, to buy bad loans for banks

Asset reconstruction firm Arcil is currently in the process of raising Rs 500 crore for a fund, which will be used for purchasing bad loans from banks. "The fund, which we are planning is for Rs 500 crore. We have received some commitments and we have to get more from others," Arcil Managing Director and Chief Executive P Rudran told PTI here in a recent interview.

The fund will be raised from qualified institutional investors, which will include commercial lenders, Rudran said. Arcil will form special trusts in which the money from the issue will be parked and then invested in the security receipts, which are used for buying stressed assets.

Arcil, the oldest asset reconstruction company, has trimmed its yearly asset purchase target by 30 per cent to Rs 3,500 crore due to change in regulation which asks ARCs to pay more on its own while purchasing assets. Rudran said Arcil is not committing any coupon on the fund, but said investors can look forward to a yearly return of up to 10 per cent.

The fund will be a five year, close-ended one, he said, adding that there will be caps on the basis of sectors, where the money can be invested. Asked for a timeline by when the fund-raising will be completed, Rudran hinted that Arcil will want to finish it this fiscal itself.

If it is not able to raise the required funds, it will go to the banks to raise the required sum, Rudran said. There are 14 ARCs operational in the country and RBI has been encouraging the entry of more such companies. In a recent speech, RBI Governor Raghuram Rajan had said ARCs need better management capabilities and more capital.

"I should mention that the RBI is open to more firms applying for licences as ARCs," he had added.