InvestorQ : Why is the Adani group seeking license for setting up an asset reconstruction company or ARC?
Khushi Patel made post

Why is the Adani group seeking license for setting up an asset reconstruction company or ARC?

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Dhwani Mehta answered.
4 weeks ago
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Adani Group has applied to the RBI for an ARC license. The purpose of this ARC is to acquire distressed under-valued assets in the infrastructure and real estate space. This business has the promise of big profits even if a few cases turn out right. While the application had already been made earlier in the year, the Adani group is awaiting the approval from RBI. To begin with, the ARC will buy bad loans in distressed businesses where the Adani group has an overall strategic interest.

Adani group already has Adani Group, an NBFC registered with RBI, and can buy stressed loans of other entities under this banner. However, using an NBFC for this purpose comes with its own disadvantages. For example, it would lead to accumulation of NPAs in its book and reduce its credit standing in the market. A better way would be to set up special purpose vehicles for buying NPAs; which would be structured as an ARC.

In the past, Adani group has purchased ports, SEZs and airports which are under stress. Adani Ports bought stressed Dighi Pots under the IBC. Similarly, Adani group has also purchased assets like the Krishnapatnam port and Gangavaram port in the state of Andhra Pradesh, giving them 30% of India’s port traffic. Adani also bought MIAL after it came under stress. Going ahead, RBI also plans to allow ARCs as resolution applicants in IBC process.

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