The acquisition processes are governed by Financial Asset Acquisition Policy, approved by the Board and framed under the guidelines issues by RBI for asset reconstruction companies. The company acquires the distressed assets across sectors by offering flexible acquisition structure to the selling banks and financial institutions for their distressed assets. The focus of the company is on acquiring assets which possess potential for revival, but the Company also acquires accounts referred to National Company Law Tribunal (NCLT). While outsourcing is resorted to, to facilitate pre-acquisition due diligence of distressed accounts, other activities including arriving at the Acquisition Price and tentative Resolution Strategy are undertaken by an efficient in-house team. A quality oriented approach to acquisition of assets is in place and the process is systematically monitored by Acquisition committee.
The Company’s resolution activities revolve around the core idea of maximization of realization from each distressed account it acquires. Our resolution strategies are geared towards reviving the accounts, wherever feasible, in the interest of all stakeholders.
Under the Reserve Bank of India (RBI) guidelines, Asset Reconstruction Companies (ARCs) are empowered to adopt one of the following resolution strategies or a combination thereof, for reconstruction of the acquired assets:
- Change in or takeover of management of the business of the borrower
- Sale or lease of part or whole of the business of the borrower
- Rescheduling of payment of debts payable by the borrower
- Enforcement of security interest
- Settlement of dues payable by the borrower
- Convert any portion of debt into shares of borrower company
The resolution strategy primarily depends on the operations of the borrower, business potential, quality and expertise of the borrower's top management and marketability of the borrower's assets. The resolution mechanism implemented bythe Company is fair, transparent and closely monitored by Resolution committee. Our resolution processes are governed by our Financial Asset Resolution Policy framed under the extant guidelines for ARCs. The aim is always to adopt a resolution strategy that is fully compliant and in accordance with the RBI guidelines, while simultaneously delivering maximum value to the stakeholders.
Rarearc ARC will operate its business in two ways, i.e. through Trusts OR directly.
The assets are acquired from the Selling Bank / FI directly in the ARCs books (which are possible in 100% cash acquisition cases). Effectively, the arrangement becomes a direct Lending-Borrower relationship between the ARC and the Borrower. The ARC retains the option to subsequently transfer the assets to a Trust (at Acquisition Price less redemption), once eligible investors (QIBs) are available for subscribing to the SRs (in which the ARC will be required to hold at least 15% of the SRs of the Trust).