Mumbai, Sep 3 (PTI) Improvement in banks’ asset quality is unlikely to dent the business for asset reconstruction companies, a top executive from IPO-bound ARCIL, one of the oldest players in the industry, said on Thursday.
Retail stressed assets are likely to grow faster than corporate assets in the near term as credit growth has been predominantly on the retail side, Phanindranath Kakarla, managing director and chief executive officer of Asset Reconstruction Company (India) Limited, said.
Asked whether the sharp improvement in banks’ asset quality and decadal-low gross NPAs could reduce the long-term opportunity for ARCs, Kakarla said the size of India’s credit base itself provides a large pool of potential stressed assets.
“Total systemic credit
in the country is over Rs 200 lakh crore… and wherever there is credit, there are inevitably distressed assets,” he said.
As of March 2026, around 68.5 per cent of ARCIL’s book was corporate, 8 per cent SME and the remaining retail.
In 2017, the RBI completed a system-wide asset quality review, which led to the identification of large chunks of stressed corporate loans sitting in bank balance sheets and a subsequent resolution.
During the COVID years, a large part of India Inc preferred to deleverage rather than taking on newer debt, which led to a focus on retail lending by banks.
Kakarla said the increase in retail stressed assets was a combination of the credit cycle and the fact that credit growth in recent years has been predominantly on the retail side.
“Recently, there’s been a lot more retail NPAs from a cycle perspective. And also because the growth has been predominantly on the retail side. I think it’s a combination of the two, not any one or the other,” he said.
He said credit moves in cycles across asset classes, including corporate, real estate, unsecured retail and secured retail housing, and ARCIL was prepared to align its business with these cycles.
On ARCIL’s recoveries falling to Rs 3,484 crore in FY26 from Rs 3,883 crore in FY25, Kakarla said the numbers could fluctuate from year to year because of the company’s large corporate book.
“Last four years our average collection has been around 3,500 crores, and we are collecting 22 to 25 per cent of our opening AUM,” Pramod Gupta, executive vice president and chief financial officer of the company, said.
“What is critical is that you churn your book in three and a half to four years, almost the entire book,” Kakarla said.
ARCIL is set to become the first standalone ARC to list on the stock exchanges. Its IPO is entirely an offer for sale, with a price band of Rs 132-139 per share. The issue will open on September 9 and close on September 11, with listing tentatively scheduled for September 17.
The combined holding of promoters or sponsors Avenue Capital and SBI will fall from close to 89 per cent to around 78 per cent following the IPO, Kakarla said.
ARCIL’s return profile is also expected to remain on its existing growth path after listing, with Kakarla saying its execution and strategy would not change.
The company has some fairly old legacy assets, but Kakarla said recoveries from such assets were continuing. PTI MSU AA HVA
