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AgenciesMumbai: JC Flowers Asset Reconstruction Company (JCF ARC) is in talks to merge with Ares SSG Group-backed Assets Care & Enterprise (ACRE), according to three people aware of the development, a move that would make it one of the largest bad-loan aggregators.
The two asset reconstruction companies are in advanced discussions on a stock-swap deal that would result in JCF ARC winding down its India operations and surrendering its ARC licence to the Reserve Bank of India (RBI).
They have been in discussions for more than three months and a formal proposal is expected to be submitted to the RBI within a week, said one of the people.
"Folding the residual book into another RBI-registered ARC through a share swap would allow JC Flowers to retain a continuing, though diluted, stake while transferring operational control and future recovery responsibilities to Acre," a person familiar with the matter said on condition of anonymity.
ACRE ARC and JC Flowers ARC did not respond to a request for comment.
US-based JCF ARC rose to prominence in India's ARC industry after acquiring a ₹48,000-crore stressed loan portfolio from Yes Bank for ₹11,200 crore in cash, outbidding Cerberus Asset Management. Yes Bank completed the transaction in December 2022.
Since then, JCF ARC has resolved non-performing assets of nearly ₹38,000 crore. On the residual ₹10,000 crore principal loan it holds security receipts (SRs) valued at about ₹2,000 crore. These SRs will be transferred to ACRE's books as part of the transaction.
The proposed merger would add to the consolidation wave in the ARC industry following the RBI's move to raise the minimum net-owned fund requirement to ₹300 crore in a phased manner by 2025-26. A decade ago, the minimum capital requirement for ARCs was just ₹2 crore, leading to a proliferation of players after the enactment of the Insolvency and Bankruptcy Code.
The merger also highlights mounting pressures on private ARCs. Since its launch in 2021, the government-backed National Asset Reconstruction Company (NARCL) has captured a growing share of large corporate stressed assets, leaving private ARCs to compete for smaller retail and small and medium enterprise loans, where recoveries and returns are lower. On July 8, ET reported that the government is exploring a merger of ASREC ARC with NARCL.
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The two asset reconstruction companies are in advanced discussions on a stock-swap deal that would result in JCF ARC winding down its India operations and surrendering its ARC licence to the Reserve Bank of India (RBI).
They have been in discussions for more than three months and a formal proposal is expected to be submitted to the RBI within a week, said one of the people.
"Folding the residual book into another RBI-registered ARC through a share swap would allow JC Flowers to retain a continuing, though diluted, stake while transferring operational control and future recovery responsibilities to Acre," a person familiar with the matter said on condition of anonymity.
ACRE ARC and JC Flowers ARC did not respond to a request for comment.
US-based JCF ARC rose to prominence in India's ARC industry after acquiring a ₹48,000-crore stressed loan portfolio from Yes Bank for ₹11,200 crore in cash, outbidding Cerberus Asset Management. Yes Bank completed the transaction in December 2022.
Since then, JCF ARC has resolved non-performing assets of nearly ₹38,000 crore. On the residual ₹10,000 crore principal loan it holds security receipts (SRs) valued at about ₹2,000 crore. These SRs will be transferred to ACRE's books as part of the transaction.
The proposed merger would add to the consolidation wave in the ARC industry following the RBI's move to raise the minimum net-owned fund requirement to ₹300 crore in a phased manner by 2025-26. A decade ago, the minimum capital requirement for ARCs was just ₹2 crore, leading to a proliferation of players after the enactment of the Insolvency and Bankruptcy Code.
The merger also highlights mounting pressures on private ARCs. Since its launch in 2021, the government-backed National Asset Reconstruction Company (NARCL) has captured a growing share of large corporate stressed assets, leaving private ARCs to compete for smaller retail and small and medium enterprise loans, where recoveries and returns are lower. On July 8, ET reported that the government is exploring a merger of ASREC ARC with NARCL.
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