MUMBAI: Kotak Mahindra Bank-sponsored asset reconstruction company Phoenix ARC has bought ₹1,800 crore of two real estate developer loans from IIFL in a structured deal, offering around 83% recovery to the Fairfax-backed non-bank lender, people aware of the development said.
“Phoenix ARC has bought the debt from IIFL for ₹1,500 crore in an open auction,” one of the sources told ET.
It has offered 15% cash and 85% security receipts for the loans that include one project in Noida and another in Jogeshwari, Mumbai. Phoenix ARC was the only participant in the open auction, the source said. Both Phoenix ARC and IIFL spokespersons did not respond to a request for comment until press time Sunday.
Higher write-offs and loan sales to asset reconstruction companies (ARCs) helped IIFL bring down gross and net stage-3 assets to 1.8% and 1.1%, respectively, of its loan book as of March 31, 2023, from 3.2% and 1.8%, respectively, a year earlier.
Stage 3 assets are loans that are overdue for more than 90 days.
IIFL’s net stressed book, including net stage 3 and net security receipts stood at 3.3% of the loan book and 12.9% of its net worth as of March 31, 2023. While the real estate book declined to 4% of assets under management (AUM) and 26% of the net worth as of March 31, 2023 (6% and 37%, respectively, including the investment in AIFs) from 8% and 78%, respectively, as on March 31, 2022, these exposures remain vulnerable to slippages, an Icra Ratings report said.
After the Reserve Bank of India ordered IIFL Finance to cease and desist from sanctioning and disbursing gold loans or assigning/securitising/selling any of its gold loans, rating firms have put the company’s rating under watch.
Fairfax India – which has been a long-term strategic investor in IIFL Finance and currently holds 15.1% in the company – had provided a liquidity line of ₹1,560 crore commitment in February.
“In the near term, this restriction on the gold loan business will lead to a reduction in overall AUM, while other key businesses of the group viz, home loans, microfinance, loan against property and others, are not directly impacted by this RBI directive,” Crisil said in a recent note.
