Asset Reconstruction Business (From JM Annual Report 2016-17)
Our asset reconstruction business is engaged in the business of acquiring and resolving distressed assets. During the year, we concluded 31 transactions with outstanding dues of 5,077 Crore acquired at a consideration of 2,252 Crore. Till March 31, 2017, we have, on a cumulative basis, acquired total outstanding dues of 28,710 Crore at a consideration of 13,279 Crore. During the year, Security Receipts worth 199 Crore were redeemed, the outstanding Security Receipts stood at ` 11,874 Crore as on March 31, 2017. The ARC business became a subsidiary of JM Financial Limited during the year. We are very selective in acquiring assets and do not acquire assets where we are unable to influence resolutions. The ARC business revenues are very lumpy in nature with high levels of profitability in the year of resolution of the assets.
The domestic banking sector continues to face substantial levels of stress in their loan portfolio partly reflecting legacy issues and deterioration of asset quality.
During the last year, several important amendments were made in the existing Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, and the Debt Recovery Tribunal (DRT) Act. The amendments are aimed at faster recovery and resolution of bad debts by Banks and Financial Institutions and making it easier for ARCs to function. The Bankruptcy Code replaces the entire gamut of extant corporate insolvency laws. It focuses on quicker decisionmaking, be it turnaround or liquidation and facilitating an early settlement of all stakeholder issues.
The ARC business of Edelweiss and JM Financial looks good after seeing the NPA crisis the banks are facing.