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L&T Finance, a subsidiary of L&T Finance Holding, is set to divest distressed assets amounting to Rs 4,762 crore to three asset reconstruction companies (ARCs) by the quarter's end as part of its strategy to clean up its financial portfolio. The prominent player in non-banking finance had invited bids from ARCs for a portfolio of Rs 5,293 crore, featuring 16 accounts. Phoenix ARC, supported by Kotak Mahindra Bank, is expected to acquire the majority of these accounts, followed by CFM ARC and Prudent ARC.
The asset sale structure involved a combination of security receipts (SR) and cash payments, with 15% as upfront cash and the remaining 85% as security receipts. The set reserve price for the portfolio was Rs 2,080 crore. However, notably, none of the ARCs expressed interest in acquiring the exposure to Delhi-NCR realtor Supertech, accounting for Rs 531 crore in outstanding loans. Consequently, L&T Finance proceeded to sell 15 accounts with an aggregate outstanding loan amount of Rs 4,762 crore.
While L&T Finance and Phoenix ARC have not responded to media requests for comments, the deal is anticipated to be finalized before the end of the month. The move aligns with L&T Finance's efforts to enhance its financial standing and has contributed to a 40% increase in its stock value in 2023, despite the company's relatively flat performance over the past five years.
The troubled exposures within L&T Finance's portfolio include Avantha Holdings with an outstanding debt of Rs 1,116 crore, Bhoruka Power with Rs 1,876 crore, IREO (Rs 433 crore), and Supertech (Rs 531 crore). Additional accounts in the distressed portfolio comprise Bhoruka Power Investments, Coast Town Planners, CSA Properties, Hanjer Biotech Mira, JCSA Enterprises, Mabsoot Buildhomes India, ND Telecom Services, Perpendicular Construction, RPS Infrastructure, Sagar Power Dendela, Shapoorji Pallonji Development Managers, and Smartstone Property Developers.
This divestment follows L&T Finance's consistent approach of selling distressed asset portfolios to ARCs. In June of the current year, the finance company sold a Rs 1,800 crore portfolio to Phoenix ARC, encompassing six real estate accounts. This transaction, structured with a 15:85 ratio, amounted to Rs 1,075 crore. Additionally, in March, L&T Finance successfully divested a ?880 crore distressed portfolio featuring five real estate loans provided to Pune-based Xrbia group.
The strategic move to offload distressed assets reflects L&T Finance's commitment to strengthening its financial position and optimizing its balance sheet. Despite the challenges posed by troubled exposures, the company's proactive measures, including targeted asset sales, demonstrate a resilient approach to navigating the evolving financial landscape.
In conclusion, L&T Finance's decision to sell distressed assets to ARCs is a strategic move aimed at streamlining its financial portfolio and fortifying its position in the market. The success of this divestment, along with its broader efforts in portfolio optimization, positions L&T Finance for continued growth and resilience in the dynamic financial sector.
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