Mumbai, March 11: The scramble among foreign entities to snap up distressed business assets has just got more intense.

At a time when Quantum Partners, Blue Ridge and JP Morgan Chase are in the process of entering this sector, either by setting up their own operations or purchasing stakes in domestic asset reconstruction companies (ARCs), FirstRand Bank, the third largest bank in South Africa, is close to picking up a 5 per cent stake in Asset Reconstruction Company Ltd (Arcil) from ICICI Bank.

Arcil is the first asset reconstruction company (ARC) to start the business of managing stressed assets or non-performing loans (NPLs) from banks and financial institutions. ARCs like Arcil buy such loans from banks at knocked-down prices and winkle profits out of them through better asset management.

While ICICI Bank now holds a little over 29.50 per cent in Arcil, FirstRand is planning to pick up 1.10 crore shares that will comprise 5 per cent of Arcil’s equity. The deal will be struck at a consideration of Rs 36 per share, aggregating to Rs 39.6 crore.

Earlier this year, ICICI Bank held over 6.50 crore shares that constituted 29.58 per cent of Arcil’s equity. This is the first time that an entity from South Africa is entering the distressed assets space in India. Current regulations allow 49 per cent foreign direct investment in ARCs.

FirstRand is an integrated financial services group providing a range of products and services in South Africa and few international markets. The Arcil shares will be acquired by the Rand Merchant Banking division of FirstRand Bank.

Meanwhile, Quantum Partners and Blue Ridge are close to picking up shares in Reliance Asset Reconstruction Company Ltd, which has been set up by the Reliance-Anil Dhirubhai Ambani Group.

Among them, Dacecroft Ltd, a wholly owned subsidiary of Quantum Partners LDC, is planning to pick up 11 per cent in Reliance ARC while Blue Ridge, the New York-based investment firm, will pick up 10 per cent through two of its arms.

FirstRand’s proposed acquisition comes after earlier reports that Barclays, the British banking group, was also in negotiations with ICICI Bank to pick up around 10 per cent in Arcil. It could not be immediately ascertained if the deal has indeed been consummated.

Foreign entities have been showing keen interest in the country’s distressed assets space after they were allowed to pick up stakes in ARCs.

Some of them like JP Morgan Chase have already acquired such portfolios from public, private and foreign banks. Although non-performing assets in the domestic banking space have been declining over the past few years, banks have been keen to hand over the management of bad loans to specialists and focus on the business of advancing loans.

prize catch

• South Africa's FirstRand Bank close to picking up 5% in Arcil from ICICI Bank
  
  
• FirstRand likely to shell out Rs 39.6 crore at Rs 36 per share
  
  
• Quantum Partners & Blue Ridge are also likely to pick up stakes Reliance Asset
  Reconstruction