Unresolved corporate loans, difficult assets can be profitable for ARCs: Pallav Mohapatra

economictimes.indiatimes.com:

State Bank of India's stressed asset division and then CEO of the bad loan-laden Central Bank of India, Pallav Mohapatra developed unparalleled expertise in dealing with non-performing assets. Now as CEO of Asset Reconstruction Company (India) (Arcil), Mohapatra has been on the buy side of the table for two years. In an interview with Joel Rebello, he talks about the opportunities and regulatory changes facing the industry.

Edited excerpts:The supply of corporate NPAs has come down. What is the outlook for the business? There are still business opportunities in the corporate book because there are assets, which have slipped into NPA a few years back and are either still in the National Company Law Tribunal (NCLT) or about to go to NCLT or even things happening outside NCLT. We are looking at those assets wherever we see a good possibility of recovery.

Fresh slippage is not happening at the rate it was happening earlier but those which have slipped into NPAs earlier have not been resolved 100% which is a segment where there is an opportunity. The other segment is some assets, for example in the IL&FS case, which were categorised as 'red' based on the solvency rate and cash flows. Such difficult assets can be acquired by ARCs (asset reconstruction companies) at a discount which means debt levels will come down and servicing capacity with the same cash flow may go up.

ARCs can give a longer time frame for repayment which will improve the ability of the existing cash flow to service the debt at that particular time. We can also use strategic investors to come in and pay off the debt. ARCs have also now been permitted to apply as resolution applicants which means they can acquire assets in association with strategic investors