Bad loans worth Rs 42k cr offered for sale this year: ARCIL ARCIL indicates that around Rs 42,000 crore of bad loans have been put up for sale in FY14, nearly 4 times the amount put in FY13.

Banking major  State Bank of India  for the first time, last week,  looked to sell upto Rs 5,000 crore in bad loans to asset restructuring companies (ARCs ). The list of banks looking to offload non-performing assets (NPAs) is getting longer by the day. The Asset Reconstruction Company of India (ARCIL) indicates that around Rs 42,000 crore of bad loans have been put up for sale in FY14, nearly 4 times the amount put in FY13. CNBC-TV18’s Senthil Chengalvarayan and Menaka Doshi spoke to P Rudran, MD and CEO of ARCIL to discuss more on the same. Below are the excerpts from the interview: Menaka: The total amount of bad loans is Rs 2.43 lakh crore. So, Rs 20,000 crore is a small fraction in terms of what will be available to your industry. However, for your industry it is huge and this is the first time you are seeing this kind of business, isn’t it? A: This is the first time. In fact it is not Rs 20,000 crore, I think Rs 20,000 crore came from last year, this year around Rs 42,000 crore loans have already been offered for sale by the banks. Menaka: Does this include the Rs 5,000 crore that SBI was supposed to offer last week? A: I don’t know the amount offered by SBI exactly but this is a rough estimate that we have done. There is no authentic information as such but we have done a rough calculation of the various offers which is more than Rs 40,000 crore. Senthil: How much would it have been last year? A: Last year it was pretty less and would have not crossed Rs 10,000 crore. It is almost 4 times. Menaka: How many have ARCIL been able to purchase? A: Last year we had purchased about Rs 740 crore. This year also we are substantially high. Menaka: Is there appetite for Rs 40,000 crore of bad loans amongst all the asset reconstruction companies given some private equity players are jumping into the fray? A: There may not be an appetite for the entire Rs 42,000 crore or Rs 50,000 crore but substantially all the ARCs have strengthened themselves to take over more assets. Secondly, compared to the previous years this year the asset sale has been mainly on security receipts basis. There the investment by the ARCs is only 5 percent, mandatory 5 percent, ofcourse you can offer more. There are certain ARCs that are offering more than 5 percent. Mandatory requirement is only 5 percent. Due to that many ARCs will be able to acquire. Menaka: What is the capacity of all the ARCs put together in this country in terms of the number of loans that they can purchase because I am trying to understand whether entire Rs 40,000 crore can be absorbed by the reconstruction industry or many of these banks hope to sell these loans but will find no takers? A: I will not be able to assess that at this point in time because in 10 years history of asset reconstruction companies this is the first time so much of assets have come in the market. People are not prepared or all the organisations are not prepared. So, taking positions this year becomes a benchmark. Senthil: How does volume affect pricing for you? Does it make it much more attractive for you? A: It is not attractive. Quality depends upon the availability of underlying assets, if underlying assets are there. Firstly, when an account becomes NPA, the bank will try its own and after some time there will be enough number of reasons for them to offload it to ARCs. Menaka: The low hanging fruit in terms of asset has already been exploited by the banks, only after that it comes to you and so, is your job more difficult to be able to recover that account? A: Yes, more difficult but we are a specialised institution. ARCIL is a specialised institution for recovery of NPAs and for distressed assets management so that specialisation will help them to recover more money which ordinarily would not have been there in the hands of the banks. SBI stock price On March 22, 2014, State Bank of India closed at Rs 1702.40, down Rs 0.2, or 0.01 percent. The 52-week high of the share was Rs 2469.25 and the 52-week low was Rs 1452.90. The company's trailing 12-month (TTM) EPS was at Rs 149.34 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 11.4. The latest book value of the company is Rs 1325.34 per share. At current value, the price-to-book value of the company is 1.28.

Read more at: http://www.moneycontrol.com/news/business/bad-loans-worth-rs-42k-cr-offered-for-sale-this-year-arcil_1055713.html?utm_source=executive-briefing