NEW DELHI: Stressed assets may be a pain area for banks, but these offer an opportunity for asset reconstruction companies (ARCs) as well as private equity firms to effectively use the Insolvency and Bankruptcy Code framework, according to Union Finance Minister Arun Jaitley.
Speaking to leading ARCs and PE firms focussed on stressed assets here on Saturday, Jaitley said accounts classified as impaired/stressed still have inherent value that could be tapped.
Jaitley said that these assets were essentially productive ones which, if turned around, would not only create additional jobs but also contribute to national output. He acknowledged that this was only possible with timely intervention, transparent price discovery and right management.
The framework available for the ARCs and PE firms include 100 per cent ownership by sponsors, higher ceiling of 100 per cent for foreign direct investment in ARCs, pass-through status to ARC trusts for income tax, exemption from stamp duty, enabling trading of security receipts, etc.
The number of players in the market is indicative of an increasing interest and the opportunity it offers to banks to offload stressed assets, Jaitley noted.
Higher acquisition by ARCs
The ratio of cost of acquisition to book value of assets acquired by ARCs has been rising. Within this overall context, the ARCs and PE funds were well placed to step up their activity levels as all the building blocks were there.