Aditya Birla ARC delivers 40% IRR amidst stressed asset recovery

Mumbai: Aditya Birla ARC, a 50:50 joint venture between Varde Group and Aditya Birla Capital, has delivered a 40% internal rate of return (IRR) to their investors-the highest among asset reconstruction companies operating in India.

"On investments of ₹6,000 crore in stressed assets it gave 40% IRR to investors with absolute profit of over ₹10,500 crore," Sanjay Jain the outgoing CEO said in a Linkedin post. It had invested in distress assets such as KSK Mahanadi Power and Rattan India Power among the other assets.

However, the ARC has decided not to make new investments going forward as it intends to surrender the ARC licence on recovering all its dues, as reported by ET last October.


CEO Sanjay Jain, who joined the ARC since its inception, is retained as advisor from this month.

As an early entrant, it acquired a critical 34% debt in the thermal power company KSK Mahanadi Power from lenders such as Axis Bank, Punjab National Bank, Bank of Baroda and State Bank of India. Lenders recovered over 100% of their dues which includes buyer JSW Energy offering ₹15,985 crore and a recovery of ₹11,000 crore-which is the cash generated from operations of the company. Aditya Birla ARC acquired the KSK loans at an average price of 29 paise on a rupee.

Similarly, it revived RattanIndia Power by acquiring ₹6,500 crore debt from 12 lenders in December 2019 wherein debt was realigned to match the cash flows of the company and some debt was converted into equity. The successful implementation of this debt recast gave 34% IRR to the trust managed by the ARC.

The comment from Jain comes when most ARCs looking at winding business with share of bad loans to total loans is at a 15-year low of 2.3-2.4% and is envisaged to remain low in coming quarters.