Avenue Capital-Backed ARCIL, India’s Largest Asset Reconstruction Firm, Prepares for IPO

Asset Reconstruction Company (India) Limited (ARCIL), the country’s first and largest asset reconstruction company, is preparing to enter the public markets and is working with advisors to draft its red herring prospectus for a proposed initial public offering (IPO).

According to a report by Moneycontrol, the Avenue Capital Group-owned ARCIL is working with IIFL as its investment banker and Trilegal as its legal advisor, along with other consultants, to facilitate the listing process.

Established in 2002, ARCIL focuses on acquiring stressed and non-performing assets from Indian banks and financial institutions. Avenue Capital Group holds a 69.7% stake in the firm, followed by minority stakes held by the State Bank of India, Karnataka Bank, Federal Bank, and The South Indian Bank.

As per the report, the total issue size is expected to fall between Rs 1,000 crore and Rs 1,500 crore, though the final figure will depend on the extent of share sales by current investors.

According to an ICRA report, ARCIL ranks among India’s largest asset reconstruction firms, with gross assets under management (AUM) totalling Rs 16,926 crore as of 31 December 2024.

The company saw a profit of Rs 249 crore during the first nine months of FY25 on a gross balance sheet of Rs 3,067 crore. For FY2024, it recorded a profit of Rs 304 crore with a gross balance sheet size of Rs 2,872 crore and AUM of Rs 15,230 crore.

IPO Push After RBI’s Greenlight

In February, The Hindu BusinessLine reported that the Reserve Bank of India (RBI) had clarified that Asset Reconstruction Companies (ARCs) are permitted to raise equity through IPOs. The move comes as ARCs aim to meet the RBI's regulatory requirement of Rs 300 crore in net owned funds (NOF) by March 2026.

Currently, 27 ARCs operate in India. While around 9–10 larger ARCs have already met the NOF threshold, smaller firms are expected to be early IPO candidates to raise the required capital, the report noted.

This advisory aligns with a long-standing recommendation by the finance ministry’s 2011 panel, which suggested allowing ARCs to go public to enhance transparency and strengthen their capacity to resolve bad loans.

As of March 2024, ARCs held assets with a book value of Rs 10.25 lakh crore and had issued security receipts worth Rs 2.83 lakh crore, with Rs 1.48 lakh crore still outstanding. In FY24, the value of stressed assets acquired by ARCs declined to Rs 1.86 lakh crore from Rs 2.09 lakh crore in FY23.