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IndoStar Capital Finance has successfully divested two distressed loans from Puranik Builders and Kanakia Spaces Realty to Phoenix Asset Reconstruction Company for Rs 790 crore, achieving an impressive 86 percent recovery from the outstanding loan of Rs 915 crore. Notably, these loans were slightly overdue, making the recovery rate even more commendable. A reliable source commented that the recovery was substantial since the loans were in stage 2, offering strong chances of recuperation. Loans fall into the stage 2 category if they are 30 to 60 days overdue, a classification commonly used by non-bank finance companies (NBFCs). As of now, both Phoenix ARC and IndoStar, backed by the support of Kotak Mahindra Bank, have refrained from responding to ET's request for comments.
Within the established arrangement, Phoenix ARC is poised to establish a monitoring trust to oversee the progression of the real estate undertakings by Puranik Builders and Kanakia Spaces Realty. The trust will also explore the possibility of partly financing the completion of these ventures. To facilitate this, Phoenix ARC has dedicated a specialized trust to acquire the loans, allocating 13.044 percent of the security proceeds to the securitization trust. The remaining 86.956 percent of security receipts have been duly passed on to IndoStar as part of the loan sale. For the management of the loan and redemption of security receipts, Phoenix ARC has designed a comprehensive five-year strategy.
IndoStar's strategic move to offload a significant portion of its legacy corporate loan portfolio to Phoenix ARC signals a strategic shift towards emphasizing its retail strategy. In its endeavours to enhance asset quality, the company has been employing a mix of tactics, including one-time liquidations, sales activities, and a heightened focus on collection. As of March 31, 2023, the gross doubtful assets (NPA) stood at 8.1 percent, whereas the net doubtful assets accounted for 3.8 percent. Post-transaction, IndoStar's stake in the retail loan portfolio, as part of its assets under management, surged from 85 percent to approximately 95 percent. Notably, IndoStar has also been actively venturing into used vehicle financing over the past year, yielding substantial returns exceeding 18 percent in the commercial vehicle domain.
The company's standalone debt-to-equity ratio, clocking in at 1.9x, coupled with a robust capital adequacy ratio of 34.4 percent for the quarter concluded in June 2023 and backed by a healthy liquidity pool, sets the stage for IndoStar's promising growth trajectory. Moreover, on April 24, IndoStar Capital Finance unveiled its strategic discussions with JM Financial Home Loans, which encompass exploring various strategic alternatives. This includes the potential amalgamation and subsequent listing of JM Financial's retail mortgage portfolio, along with IndoStar Home Finance's home finance business, in addition to other undertakings supported by parental mortgages.
Founded in 2011 and headquartered in Mumbai, India, IndoStar Capital Finance is a non-banking financial company (NBFC). The company caters to specific client needs by offering structured term finance solutions to corporations and extending loan-against-property (LAP) services to SME borrowers. At present, Brookfield possesses around 52.6 percent ownership in IndoStar, while Everstone maintains a 33 percent stake in the company.
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