By Mr. Abhay Ray 
Introduction
Asset Reconstruction Company (India) Limited (ARCIL), the country’s first and one of the largest asset reconstruction companies, is preparing for its maiden public offering. This move comes on the heels of a regulatory greenlight from the Reserve Bank of India (RBI), which recently clarified that Asset Reconstruction Companies (ARCs) are permitted to raise equity through Initial Public Offerings (IPOs). ARCIL, established in 2002, is now actively working with key advisors to initiate its IPO process, potentially setting a significant precedent in the financial sector.
IPO Momentum Post RBI’s Nod
In February 2025, The Hindu Business Line reported that the RBI had clarified the regulatory framework, enabling ARCs to access the equity capital markets. This policy shift is aimed at helping ARCs meet the minimum net owned fund (NOF) requirement of ₹300 crore by March 2026. The move is also in line with the Finance Ministry’s 2011 panel recommendations, which advocated for allowing ARCs to go public to improve transparency and bolster their capacity to resolve non-performing loans.
India currently has 27 registered ARCs, out of which 9–10 have already met the NOF requirement. However, several smaller ARCs may now explore IPOs as a means to bolster their capital base. ARCIL, as one of the more established players, appears to be leading this transition.
ARCIL’s Ownership and Strategic Moves
ARCIL is primarily backed by Avenue Capital Group, a US-based investment firm th
\at holds a 69.7% stake. State Bank of India (SBI) is also a co-sponsor, while other stakeholders include Karnataka Bank, The South Indian Bank, and Federal Bank.
Avenue Capital first invested in ARCIL in 2018, acquiring a 27% stake from a mix of shareholders including GIC, IDFC Bank, First Rand Bank, Ash more Capital, Barclays, and Karur Vysya Bank. Over the years, it has steadily increased its holding by acquiring shares from other institutional investors. In 2022, it notably acquired IDBI Bank’s entire 19% stake.
Avenue Capital, co-founded by Marc Lasry and Sonia Gardner in 1995, manages over $11 billion in assets across specialty lending, opportunistic credit, and special situation investments across the US, Europe, and Asia. The firm’s long-term interest in ARCIL underscores the value and potential it sees in the Indian distressed assets space.
Preparing for the IPO
According to individuals familiar with the development, ARCIL has engaged investment bank IIFL and law firm Trilegal to assist with drafting the Draft Red Herring Prospectus (DRHP) and managin
Asset Reconstruction Companies Indiag the IPO process. The public offering is expected to have a significant offer-for-sale (OFS) component, with existing shareholders looking to offload part of their holdings. However, the exact quantum of shares to be sold by each investor is yet to be finalized.
Preliminary estimates suggest that the IPO could be in the range of ₹1,000–1,500 crore. This amount may vary based on market conditions and the extent of the stake dilution by current shareholders.
When reached for comment, ARCIL declined to respond to the media reports.
Financial Performance and Market Position
As per a March 2025 report by credit rating agency ICRA, ARCIL remains one of the top asset reconstruction companies in India. As of December 31, 2024, the company’s gross Assets Under Management (AUM) stood at ₹16,926 crore, up from ₹15,230 crore in FY2024.
In the first nine months of FY2025, ARCIL reported a profit of ₹249 crore on a gross balance sheet size of ₹3,067 crore. This followed a strong performance in FY2024, where it posted a net profit of ₹304 crore with a gross balance sheet size of ₹2,872 crore. These figures reflect the firm’s continued focus on profitability, prudent asset selection, and operational scalability.
ARCIL’s asset mix as of December 2024 included 66% in corporate loans, 19% in SME loans, and 15% in retail loans. Going forward, the company is expected to increase its focus on acquiring small and medium enterprise (SME) and retail assets, which are seen as more stable and diverse segments within the distressed asset space.
In terms of market activity, ARCIL issued security receipts (SRs) worth ₹3,235 crore in the first nine months of FY2025, with retail assets contributing 29% to this total. This is an improvement from FY2024, where the firm issued SRs worth ₹2,068 crore, of which 26% were backed by retail assets.
The ARC Sector in Transition
As of March 2024, ARCs in India collectively held assets with a book value of ₹10.25 lakh crore. Security receipts worth ₹2.83 lakh crore had been issued, out of which ₹1.48 lakh crore remained outstanding. The value of stressed assets acquired by ARCs has seen a decline, falling to ₹1.86 lakh crore in FY2024 from ₹2.09 lakh crore in FY2023.
Despite this dip, the overall ARC sector remains a critical component of India’s financial ecosystem, especially in the post-COVID recovery era, where resolving bad loans and restoring banking sector health is a national priority.
Conclusion
ARCIL’s upcoming IPO is a landmark event for India’s asset reconstruction industry. It reflects not only ARCIL’s strong market position and investor confidence but also a broader regulatory shift aimed at modernizing and capitalizing the ARC ecosystem. If successful, this IPO could pave the way for more ARCs to tap into public markets, raising the sector’s transparency, financial strength, and ability to deal with India’s complex distressed asset challenges.
GetMyIndia.com RaysVeda.com GetMyStartup.com LawCanal.com ABHAYRAY.COM ZinCob.com