Edelweiss ARC to double investments in retail bad loans : Rashtra News
Many loans taken during Covid-19 could turn bad as incomes in several segments are under stress. Last year, Edelweiss ARC bought retail loans for about ₹500 crore across mortgage, loan against property (LAP), small and medium enterprises, commercial vehicles, auto loans and unsecured segments.
“The coming two-three years will throw up good buying opportunities in the retail space, and the idea is to generate 50-50 retail and wholesale business going forward,” said RK Bansal, CEO, Edelweiss ARC. “In the next few years, the retail book should give us 40% of the total profits.”
Edelweiss ARC has retail assets under management of ₹1,800 crore, spread across 500,000 accounts, bought with a total investment of nearly ₹500 crore. Half the portfolio is housing and LAP loans, which go at much higher valuations of 50-60 cents a dollar. It has also set up a 50-member team to service these loans.
“Retail is a very different ball game. Loan recovery requires a lot of infrastructure investment, including feet on street, call centre, data analytics and some reputation risk,” said Bansal. “Also, in India, the pricing has not reached that level which should happen in retail NPA (non-performing assets). The rates are still quite high.”
Most private lenders, non-banking financial companies and housing finance companies are exploring sale of retail loans to ARCs. As per industry data, in the first half of this financial year, private financial institutions put retail loans worth ₹3,234 crore on the block. The figure for the entire 2020-21 was ₹8,410 crore.
Most marquee private institutions are in the market, selling retail bad loans to avoid deterioration in asset quality ratios beyond a certain level. Some other institutions, especially non-banking lenders, want access to liquidity and prefer cash deals at large haircuts. A bulk of these deals happened through the 15-85 model, where 15% is paid upfront to the selling institution while the remaining 85% is traded in security receipts redeemable at a later date.
For the quarter ended September, Edelweiss ARC’s assets under management stood at ₹42,800 crore against ₹42,400 crore a year ago.
( News Source :Except for the headline, this story has not been edited by Rashtra News staff and is published from a economictimes.indiatimes.com feed.)
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