Kotak Mahindra Group-backed Phoenix ARC Pvt. Ltd. has acquired nonperforming real estate loans of around INR 19 billion ($227.7 million) from IIFL Finance Ltd., the nonbank finance arm of IIFL Group, for INR 15 billion, of which 15% will be paid for in cash and the balance via the issue of security receipts, according to two sources close to the development.
Phoenix ARC closed the deal on Saturday, March 30, and has paid INR 2 billion as upfront cash for acquiring the NPLs from IIFL Finance, the sources said.
The stressed loans consist of delayed real estate projects, and the asset reconstruction company expects a “sizable net surplus” from the projects, the sources said. Net surplus is the sum of pending collections from areas sold plus value of unsold inventories minus pending construction costs.
IIFL Finance is planning to put additional nonperforming real estate loans of around INR 6 billion for sale, said a source close and a source familiar, adding that the company has struck a bilateral deal with Phoenix.
The stressed loans sold by IIFL Finance will help improve its liquidity position, especially since India’s central bank – Reserve Bank of India – has
barred it from disbursing gold loans.
Subsequently, the nonbank finance company on March 20 raised INR 5 billion through a private placement of nonconvertible debentures at 9.5% per annum, as
reported. IIFL Finance is also going to raise INR 15 billion through a rights issue, as
reported.
IIFL Finance, Phoenix ARC did not respond to emails requesting comment.
– Malvika Joshi, Subrata Panda