Avenue Capital ups stake in Arcil as IDBI Bank exits

 Avenue Capital ups stake in Arcil as IDBI Bank exits

New York-based stressed assets investment firm Avenue Capital has increased its stake in Asset Reconstruction Company (India) Ltd, or Arcil, by buying out IDBI Bank.

Avenue Capital bought IDBI Bank’s 19.18% holding in the company, the lender informed stock exchanges. It now owns 44.18% of India’s oldest asset reconstruction company. Avenue Capital had first acquired a 25% stake in Arcil in November 2018.

Neither Avenue nor IDBI Bank disclosed financial terms of the transaction.

Arcil’s other large shareholders are State Bank of India (20%), ICICI Bank (13.26%) and Punjab National Bank (10%). The other shareholders include Singapore sovereign wealth fund GIC (5%) and ICICI Home Finance (2.26%). Karnataka Bank, South Indian Bank and Federal Bank jointly hold a 5.2% stake in the company.

Media reports late last year said Avenue was also looking to acquire the stakes held by PNB, ICICI Bank and ICICI Home Finance to take its stake to around 69.7% stake.

India allows foreign investors to own 100% of asset reconstruction companies. However, no single investor can hold more than 50% in an asset reconstruction company. Moreover, a foreign investor requires government approval to increase its stake beyond 49%.

Arcil is amongst the top three ARCs in the industry with assets under management of Rs 14,227 crore as on September 30, 2021, up from Rs 13,833 crore six months before.

The transaction comes a year after Avenue Capital raised $337.8 million for its sixth Asia fund. It also raised $50 million each for the new fund’s two co-investment vehicles last year. It isn’t clear if Avenue is still seeking capital commitments for the three vehicles or whether it has finished fundraising.

Avenue Capital had amassed about $450 million for its fifth Asia fund in 2018. In late 2018, it struck a big-ticket deal in India by buying about a fourth of ARCIL from Barclays Bank, FirstRand Bank and some other investors.

The investment firm had returned to Asia fundraising in 2016 for its fifth vehicle after a gap of nearly a decade when it had amassed around $2.7 billion for its fourth fund, according to media reports at the time.

Avenue Capital, set up in 1995 by Marc Lasry and Sonia Gardner, manages separate funds for Asia, Europe and the US. It focuses on investing in distressed debt and other special situations such as corporate restructurings, mergers and acquisitions, bankruptcies and spinoffs.

In Asia, the firm chases both debt and equity investment opportunities mainly in Australia, Hong Kong, Singapore, South Korea, Japan, China, India and Southeast Asia.

Apart from New York, the firm has four offices in Europe, five offices in Asia and an office each in Silicon Valley and Abu Dhabi. The firm managed $12.3 billion in assets as of April 30, 2022, up from $11.4 billion as of April 30, 2021.

Sumit Upadhyaya

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