Blackstone, the world’s largest alternative asset manager, is exiting the distressed assets space in India by selling its controlling interest in a high-profile, five-year-old joint venture that includes the Tata Group, HDFC Bank and ICICI Bank as partners. Besides Blackstone, the other key shareholders are expected to continue.
Mathew Cyriac, the former private equity co-head for Blackstone India, is the frontrunner to buy a controlling 51% stake in International Asset Reconstruction Co. Pvt. Ltd (IARC) from his erstwhile employer. The exercise values the target company at around Rs 200 crore, people aware of the proposed deal told ET.
Cyriac’s firm Florintree Advisors and Shriram Transport Finance were the final contenders but Cyriac is believed to have pipped the Chennai based financial services firm. Non-bank lenders Capri Global and Authum Investments & Infrastructure Ltd had also shown initial interest in the company.
Cyriac had joined Blackstone as its second employee in India in 2006 but left in February 2017 to start his own venture, having overseen the firm’s first leadership transition in the country.
Set up in 2002 by Arun Duggal, a former managing director and chief executive officer of Bank of America in India, along with former State Bank of India chairman M.S. Verma, Blackstone’s Tactical Opportunities (BTO) Fund in September 2017 acquired a controlling interest in IARC. Blackstone Tactical Opportunities Fund is a $40bn fund and now investing from its 4th fund of $10bn.
In recent years, however, it has scaled down its Asia presence following the exit of several senior executives, such as Kishore Moorjani, senior managing director, based out of Singapore. BTO invested around $75m across five investments directly with IARC as a JV partner.
The net worth of IARC is expected to be around Rs 300 crore with Rs 180-190 crore cash on books. Duggal retains a 5% stake in the company, while the Tata Group and the two leading private banks are set to continue in the company.
Blackstone declined to comment. Cyriac could not be reached for comment.
Retail Specialism
Most ARCs in India have focused on the wholesale segment, restructuring big corporate loans. However, retail loans are becoming a big opportunity.
“IARC is one of the few that focuses on retail assets. That is why there is heightened interest. It has reputed shareholders but for Blackstone, it is no longer a focus area. It comes with management and systems that otherwise would take a year to build,” said an official in the know. “With such pedigree, a focused strategy can help take this company public in a few years. With leading banks as shareholders, it could also be captive originators of business.”
In October, central bank governor Shaktikanta Das had said that the regulator was closely monitoring some fast-growing personal loan categories for signs of stress. The Reserve Bank of India (RBI) has also asked banks to set aside additional capital against loans to non-bank lenders, raising the risk weighting on such exposure.
The banking regulator has also increased the capital requirements for banks to set aside for certain categories of consumer loans. On 16th November, the RBI raised the risk weights for lenders and non-bank financial companies (NBFCs), or the capital that banks need to set aside for every loan, by 25 percentage points to 125% on retail advances. The new risk weighting will apply to personal loans for banks and to retail loans for NBFCs, the RBI said.
On credit card exposures, the RBI raised the risk weights by 25 percentage points to 150% and 125% for banks and NBFCs, respectively. Lenders should put in place board-approved policies for exposure to different consumer credit categories.
“In particular, limits shall be prescribed for all unsecured consumer credit exposures,” the central bank said.
Selling Retail NPAs
On November 14, ET reported that RBL Bank plans to sell credit card loans exceeding Rs 800 crore and an MSME loan portfolio of Rs 300 crore, potentially marked as non-performing assets (NPAs), due to missed payments. These loans have turned bad over the past two years and some written off by the private bank, said a second source. The bank is looking to sell these bad loans on an all-cash basis.
Similarly, in July, Bandhan Bank, a Kolkata-based private lender, sought to reduce bad loans and invited offers from asset reconstruction companies (ARC) for its distressed retail mortgage portfolio worth Rs 500 crore. The portfolio comprises approximately 5,800 accounts consisting of home loans, with a total principal loan book of about Rs 500 crore.
As per data released by credit bureau Transunion CIBIL, in November, delinquencies, defined as loans overdue by more than 90 days, were at 0.84% for all personal loans. However, for loans below Rs 50,000, delinquencies were higher at 5.4%.
