Indian five hundred rupee banknotes are arranged for a photograph in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Avenue Capital Seeks To Become Largest Shareholder In India’s Oldest ARC

India’s oldest asset reconstruction company is set to see a change in its ownership pattern, which may allow the firm to become more aggressive in the bad loan market in the country.

U.S. based Avenue Capital is set to pick up 27 percent stake in a Asset Reconstruction Company of India Ltd. from a clutch of existing investors, the management said in an announcement on Monday. As part of the deal, five existing shareholders will sell their holdings. This includes IDFC, Barclays, Karur Vysya Bank, First Rand Bank and Ashmore Capital.

Avenue Capital will become the largest shareholder in ARCIL after the transaction. The RBI’s approval for the deal is awaited.

While ARCIL is India’s oldest asset reconstruction firm, private peers like Edelweiss ARC have been more active in the stressed asset market in India in recent years. Indian banks are sitting on more than Rs 10 lakh crore in bad loans, making this an opportune time for ARCs to pick and choose the right assets. ARCIL, however, has remained focussed largely on the retail and small and medium enterprises segment.

ARCIL plans to raise Rs 1,000-1,500 crore in the next six months, Managing Director and Chief Executive Officer Vinayak Bahuguna said in a press conference.

According to Bahuguna, ARCIL is selectively looking at some of the industrial assets too. We are looking at steel, textile and road project, Bahuguna said, while adding that the firm may also evaluate some stressed power projects.

(Corrects an earlier version that misquoted Vinayak Bahuguna on deal valuation)