India has witnessed a burgeoning rise in gross non-performing assets (NPAs) over the past few years. The economic burden of these bad debts has become a subject of scrutiny, especially due to its impact on bank’s capacity to lend. As a result, substantial proportion of a bank’s assets cease to generate income for the bank, lowering its profitability and ability to grant further credit. One of the key remedial measures adopted to correct this is through Asset Reconstruction Companies (ARCs), under the Reserve Bank of India. ARCs are designed to manage stressed assets by acquiring NPAs from banks through an open and transparent process of bidding and resolve them to maximize their value.
ARCs are regulated by the Securities and Reconstruction of Financial Assets and Enforcement of Securities Interest (SARFAESI) Act, 2002. Among the 28 ARCs operating in the country under the SARFAESI Act, 2002, today, UV Asset Reconstruction Company Limited (UVARCL) is India’s fastest growing and one of the top 10 ARCs. It is a home-grown, first-generation entrepreneur-driven company which was incorporated in 2007 under the provisions of the Companies Act, 1956.
The core competence of the company is to understand the root cause of the problem and estimation of cost & time for resolution, through a comprehensive due diligence process covering all legal, financial and operational aspects. The intent is to custom create the best resolution in each circumstance.
As a testament to this, Mr. Ritesh Aggarwal, Chief Financial Officer of UVARCL says, “We are cognizant of the value of research and development and understand its importance in our sector to drive business success. We have therefore invested in expanding the team with qualitative experience across relevant industries and transactions that will accelerate our growth whilst ensuring operational excellence in everything we do.”
UNDERSTANDING UVARCL BUSINESS
The restoration and rehabilitation procedure of NPAs back to health is an extensive task. While maximisation of recovery is the primary objective, all possible efforts are made to restore the unit and maintain going concern
The company believes in an empathetic approach to resolving distressed assets by meaningful analysis that evaluates all possible turnaround options and formulates the best-fit strategy under the given circumstances, aiming to create a win-win for all stakeholders concerned. The company has successfully resolved some of the most difficult cases turning them around into viable businesses.
The company is operationalized by a management team that includes several senior bankers with decades of experience in the field of stressed asset management. In addition, it has appointed sectoral experts as advisors, who are invited to bring their understanding at the time of evaluating a stressed asset to provide customized reconstruction solutions that retain the economic value of the business to maximize returns for lenders and related stakeholders. UVARCL maintains highest order of Corporate Governance and complete transparency in operations.
Their clients comprise of all public sector and private sector banks, Non-Banking Financial Company (NBFC)s/ and Financial Institution (FI)s. Through these clients, the company has acquired debt across various segments like power, steel, cement, infrastructure, telecom, food processing among others.
ETHICS AND VALUES
At UVARCL, they firmly believe in strict adherence to compliance with regulations and norms. Keeping integrity as the heart of their business, they lay substantial impetus on fairness, respect, responsibility, client care and purposefulness across all our operations.
“Further to our promise of corporate governance, we are driven to serve the society with best industry practices. UVARCL has a dedicated CSR fund that contributes to several social causes which include promoting girl education, eradicating hunger and poverty and more,” said Mr. Aggarwal.”
CONSISTENCY OF RESULTS TO EARN LENDER AND INVESTOR CONFIDENCE
Since 2011, UVARCL has managed stressed Assets Under Management (AUM) of INR 1,500 crores by acquiring 44 stressed accounts and currently the AUM is over INR 1000 crore. The average resolution period of these accounts has been 2-3 years with an Internal Rate of Return (IRR) of over 20%.
In the last 3 years, the company has delivered a CAGR of 97.53% and has grown its net worth to over 136 crores (as on December 31, 2019). UVARCL has a Capital Adequacy of 43% and credit rating of BBB (stable) by CARE.
ADVICE TO THE FLEDGLING ENTREPRENEURS
Well thought through strategy is key in designing and rolling out new business propositions. It is imperative to practise in-depth and comprehensive due diligence to understand where the industry currently stands, stance of your competitors and how you, as a brand will create a niche to disrupt the space.
