Crisil Limited · NSE:CRISIL

Crisil — ARC webinar (August 2014)

15 slides from Crisil's conference presentation, Aug 7, 2014

  1. Slide 1: What is bad for banks is good for ARCs

    What is bad for banks is good for ARCs Distribution rights reserved. Track record for asset resolution critical for long-term sustainability AllExternal Ltd.For Pawan Agrawal Subha Sri Narayanan – Not Team Leader – CRISIL Ratings CRISIL Senior Director – CRISIL Ratings Use Only © 2014 For Internal N

  2. Slide 2: Key messages

    Key messages  Growth will settle at a lower level for ARC industry – AUM reached Rs.42,000 crore by June 2014, a 4 times increase in a year – Growth to moderate to 30 per cent in the current year, given the recent regulations  Capital and earnings will emerge as challenges Distribution – Recent re

  3. Slide 3: Growth will settle at a lower level for ARC industry

    Growth will settle at a lower level for ARC industry Trend in Assets Under Management (AUM; SRs outstanding) 60,000 55,000 50,000 42,000 40,000 Rs. Crore Distribution rights reserved. 30,000 AllExternal 20,000 8,800 10,000 Ltd.For – Not CRISIL - Use Only Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun

  4. Slide 4: Capital and earnings will emerge as challenges

    Capital and earnings will emerge as challenges  Given the nature of assets, ARC business has traditionally been equity- funded  Aggregate net worth is modest at ~Rs.2,500 crore as on June 30, 2014 – Gearing has increased to 1x as on June 2014 from 0.1x as on June 2013 Distribution – Gearing philos

  5. Slide 5: ARCs have successfully reconstructed several large accounts

    ARCs have successfully reconstructed several large accounts  Reconstruction has been used as preferred strategy for large accounts* – Reconstruction includes restructuring and sale of Sale of assets/ business strategies Settlement 23%  Several success stories over the past decade Distribution – A

  6. Slide 6: Sale of assets drive recoveries from small accounts

    Sale of assets drive recoveries from small accounts  Sale of assets has been used as preferred strategy for small accounts* – Includes settlement with promoters as well Re-construction 21%  Redemption ratio is better at ~63% Distribution rights reserved. Sale of assets/ Settlement AllExternal 79%

  7. Slide 7: Overall recovery has not been up to the potential

    Overall recovery has not been up to the potential Trend in Industry Redemption Ratio Recovery Ratio – 5 yr plus vintage 12,000 60% 53% Actual recovery till Dec 2013 (A) 4,800 10,000 50% Redemption Ratio (%) 8,000 40% 32% Rs. Crore Principal debt acquired till Dec 13,200 Distribution 6,000 30% 2008 (

  8. Slide 8: Outlook: Better recovery prospects ahead

    Outlook: Better recovery prospects ahead  Recent regulatory changes will improve quality of debt acquired… – Early formation of, and participation at, Joint Lenders’ Forum is a significant positive step – Lower threshold (60%) for consent to enforce SARFAESI to speed up debt aggregation  …due to v

  9. Slide 9: Recent regulations structurally positive for the sector

    Recent regulations structurally positive for the sector Regulations Impact  Will lead to higher capital requirement for ARCs  Will significantly impact growth Increase in minimum investment requirement in SRs to 15%, from 5%  ARCs to have more skin in the game – will drive better recovery in the

  10. Slide 10: CRISIL Limited

    www.crisil.com CRISIL Limited Stay Connected | Twitter | LinkedIn | YouTube | Facebook 10 For Internal Use Only © 2014 – Not CRISIL Ltd.For Distribution rights reserved. AllExternal

  11. Slide 11: Primer on ARCs and CRISIL's experience in the sector

    the sector Primer on ARCs and CRISIL’s experience in 11 For Internal Use Only © 2014 – Not CRISIL Ltd.For Distribution rights reserved. AllExternal

  12. Slide 12: CRISIL's wide coverage provides a 360° view of the ARC industry

    CRISIL’s wide coverage provides a 360° view of the ARC industry Rated ~50 banks Ratings of banks Loans Redemption proceeds Distribution rights reserved. AllExternal Recovery Ltd.For Rated SRs risk rating Ratings of Rated more – Not ~Rs.12,000 cr of SRs bank loans than 13,000 firms CRISIL issued by U

  13. Slide 13: What are Asset Reconstruction Companies?

    What are Asset Reconstruction Companies?  Specialised institutions to deal with NPAs in India; regulated by RBI  Play an important role of putting back the assets for productive use  Industry is in nascent stage even with more than 10 year history  Arcil was set up as first ARC in 2002; currentl

  14. Slide 14: ARC model in India

    ARC model in India Bank/FI Investor Payment NPA Investment Issuance/ for NPA sale Sale in SRs Redemption of SRs Distribution rights reserved. Rating of SR issuances CRISIL ARC AllExternal Ltd.For – Not Resolution CRISIL Recovery strategy Use Only © 2014 For Internal Distressed Asset/NPA  ARCs acqui

  15. Slide 15: CRISIL's recovery risk rating scale

    CRISIL’s recovery risk rating scale Symbol Range R1+ Indicates 150% and above recovery of outstanding face value of SRs Distribution rights reserved. R1 Indicates 100% to < 150% recovery of outstanding face value of SRs AllExternal Ltd.For R2 Indicates 75% to < 100% recovery of outstanding face valu

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