L&T Finance is strategically moving forward to enhance its financial stability by selling distressed assets valued at ₹4,762 crore from its loan portfolio to three prominent asset reconstruction companies (ARCs) by the end of this quarter. This move aligns with the company’s broader strategy to optimize its asset portfolio and cleanse its balance sheet.
L&T Finance, a subsidiary of publicly-listed L&T Finance Holding, initiated the sale process by inviting offers from ARCs for a portfolio valued at ₹5,293 crore, comprising 16 accounts. The offering includes a combination of security receipts (SR) and cash payments, structured with 15% upfront cash and the remaining 85% as security receipts. Notably, a reserve price of ₹2,080 crore was set for this portfolio.
In a noteworthy development, none of the ARCs expressed interest in acquiring the exposure to Delhi-NCR realtor Supertech, which constituted one of the 16 accounts in the portfolio with outstanding loans amounting to ₹531 crore. Consequently, L&T Finance proceeded with the sale of the remaining 15 accounts, totaling ₹4,762 crore.
As of the latest update, L&T Finance and Phoenix ARC have refrained from providing comments on the matter. Efforts to reach out to other ARCs for their statements have been inconclusive. The transaction is expected to conclude before the end of this month, according to reliable sources.
This strategic move comes as L&T Finance seeks to revitalize its financial performance. The company’s stock, which had remained relatively stagnant over the past five years, has experienced a remarkable 40% surge in 2023. This surge can be attributed to L&T Finance’s commitment to cleaning up its balance sheet by divesting non-performing assets.
The distressed assets being divested include exposures to entities such as Avantha Holdings with an outstanding debt of ₹1,116 crore, Bhoruka Power with ₹1,876 crore, IREO with ₹433 crore, and Supertech with ₹531 crore. Other accounts in the portfolio encompass Bhoruka Power Investments, Coast Town Planners, CSA Properties, Hanjer Biotech Mira, JCSA Enterprises, Mabsoot Buildhomes India, ND Telecom Services, Perpendicular Construction, RPS Infrastructure, Sagar Power Dendela, Shapoorji Pallonji Development Managers, and Smartstone Property Developers.
L&T Finance has been consistently executing its strategy of selling distressed asset portfolios to ARCs. In the last week of June this year, the finance company successfully sold a portfolio valued at ₹1,800 crore to Phoenix ARC, comprising six real estate accounts. This transaction was structured with a 15:85 payment arrangement and was reported by ET on July 4. In March, L&T Finance also completed the sale of a ₹880 crore distressed portfolio, including five real estate loans extended to the Pune-based Xrbia group.
In conclusion, L&T Finance’s decision to divest ₹4,762 crore worth of distressed assets to ARCs marks a significant step in its ongoing efforts to enhance its financial health and focus on core operations. The transaction is poised to have a notable impact on the Indian financial landscape, with Phoenix ARC, CFM ARC, and Prudent ARC playing key roles in this transformative deal.
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