NY’s Oz joins queue to pick up Arcil stake

KOLKATA: New York-based Oz Management, globally one of the top 10 funds with assets over $10bn, has decided to enter the Indian asset reconstruction segment. It has recently established contacts with Arcil (Asset Reconstruction Company India) for acquiring an equity stake.

Oz Management is, however, not the sole foreign entity to have initiated talks with Arcil for a possible ‘holding’ in the company. It is learnt groups like Morgan Stanley, Warburg Pincus, and Barclays are also in the fray.

The present foreign direct investment (FDI) norm stipulates a maximum foreign holding of 49% in an ARC with a cap of 10% for an individual entity.

Arcil has recently floated a Rs 360-crore rights issue including a premium component of Rs 240 crore. Foreign investors would be offered a stake if the current issue is not fully subscribed. It expires on July 7. At present, ARC’s entire holding is with 11-odd shareholders, all of which are Indian banks. ICICI Bank, the largest equity holder, has 29.58%, while IDBI and SBI hold 19.95% each.

Punjab National Bank’s stake stands at 10%. Karur Vysya Bank, Karnataka Bank and Citi Corp Finance, on the other hand, hold a total of 16%. The rest — South Indian Bank, Federal Bank, and HDFC — have acquired stakes in Arcil. Nevertheless, Oz Management has already approached the Foreign Investment Promotion Board (FIPB) for a permission to invest here for reconstruction/resolution of non-performing assets (NPA) acquired from banks and financial institutions.Meanwhile, Arcil’s net worth which stands at Rs 100 crore is slated to touch Rs 480 crore once the rights issue is complete.

Till March ’06, Arcil has acquired 562 NPA accounts from 31 banks/FIs with total dues of Rs 21,144 crore. It completely exited 64 cases with total dues of Rs 2,010 crore. It resolved 173 cases comprising 52% of the total dues acquired. The ARC recovered and distributed to investors Rs 827 crore with 34% an internal rate of return.