Omkara ARC Secures Rs. 6,151 Crore IDBI Bank NPA Portfolio

In a crucial auction, Omkara Asset Reconstruction Company (ARC) has emerged as the winning bidder to acquire non-performing assets (NPAs) worth Rs.6,151.16 crore from the Stressed Asset Stabilisation Fund (SASF) of the erstwhile Industrial Development Bank of India (IDBI), according to the reports. This sale translates to a recovery of 10.5% for IDBI Bank, positively impacting its second-quarter earnings.

Competitive Bidding 

Omkara ARC, along with the state-owned National Asset Reconstruction Company Limited (NARCL), were the frontrunners in the bid to acquire this NPA portfolio. Initially, both companies offered the reserve price of Rs.642 crore. However, on August 3, Omkara ARC increased its bid to Rs.652 crore, ultimately securing the portfolio.

SASF’s Role & Auction Details

SASF, a government-formed special purpose vehicle for managing the assets of the erstwhile IDBI, had invited Expressions of Interest (EoIs) in May for the distressed portfolio. The portfolio includes 239 accounts with a gross principal outstanding of Rs.6,151 crore. Of these, 81 accounts involve tangible securities and guarantees worth Rs.2,179.51 crore, while the remaining 158 accounts involve guarantees and claims worth Rs.3,971.65 crore.

EY’s Involvement 

Ernst & Young was appointed as the process advisor for the sale. Despite an initial reserve price of Rs.713 crore, the SASF did not receive any binding bids, prompting a revision to Rs.642 crore. This adjustment attracted binding bids from both NARCL and Omkara ARC, leading to the final auction.

Government’s Stake Sale 

According to the reports, the government, which holds a 45% stake in IDBI Bank, along with LIC’s 49.24% stake, aims to sell 60.7% to a private player, with a precondition to dilute this to 26% over time. The sale of these stressed assets is a move to improve the bank’s valuation ahead of the proposed stake sale.

Conclusion: In conclusion, the successful acquisition by Omkara ARC marks a critical step in managing and resolving IDBI Bank’s distressed portfolio, setting a positive precedent for future transactions for the bank.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.