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Webinar On How Asset Restructuring Companies (ARCs) shall resolve Stressed Assets?

Post Covid-19, the market conditions are going to worsen due to mounting loss of income and increase in fixed expenses. It will be interesting to watch how ARC will play the role in order to revive and rehabilitate the stressed accounts, inevitable because of the ongoing economic conditions.

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Webinar On How Asset Restructuring Companies (ARCs) shall resolve Stressed Assets?

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  1. Webinar On How Asset Restructuring Companies (ARCs) shall resolve Stressed Assets? RESURGENT INDIA KNOWLEDGE SERIES PRESENTS Webinar On How Asset Restructuring Companies (ARCs) shall resolve Stressed Assets? Speakers- Mr Pradeep Goel, CMD- Prudent ARC Speakers- Mr Avinash Kulkarni, CEO- India Resurgence ARC Speakers- Mr Sanjay Tiberwala, CEO- Phoenix ARC Moderated by- Mr Sudharshan Kedia, AVP- Resurgent India Limited Premise ● Market Expectation from ARCs ● Position of ARCs with respect to resolution of Stressed Assets. ● Role of Existing management for revival of stressed accounts with ARCs ● Role of Financial advisors in coordination with ARCs for resolution of stressed assets Key Takeaways- General Overview ● Post Covid-19, the market conditions are going to worsen due to mounting loss of income and increase in fixed expenses. It will be interesting to watch how ARC will play the role in order to revive and rehabilitate the stressed accounts, inevitable because of the ongoing economic conditions. ● Never seen before challenges will arise in all the sectors of the economy and they will have to be individually addressed. ● ARC companies will have to rationalise and carefully use their funds while providing sufficient IRRs to their investors while buying the assets. It should be credit worthy. ● The source of funding is most likely expected to be from outside given the domestic inability and constraints due to the economic situation. ● ARC also might not go to IBC, unless it is reasonably sure that there is a buyer of that asset. At a time when businesses cash flows are plundering and are struggling to manage them, there is going to be

  2. inorganic growth, therefore recourse to IBC will come down because of the prolong and slowed procedures from the matured investors for at least 6-9 months. ● Changes in the RBI guideline, for extent of provisioning in SRs. The banks are discouraged to sell on the SR basis which increases the cash component required by ARC and thereby increases the risk. Therefore the SR model should be put back into the system which will help the government to revive more business and banks more money. Webinar On How Asset Restructuring Companies (ARCs) shall resolve Stressed Assets? ● RBI should extend the list of qualified buyers which currently include only Banks, Financial Institution and NBFCs. It should allow individuals & HNI to bid for investing in stressed assets which will open the floodgates of funds. ● Inherent philosophy is to retain the existing management in order to run the unit and business before looking out for options. ● But the existing management/ promoters should be open to unlearning the old techniques and replace it with transparent behavior, focus less on poor business operations and more on saving cost by adopting robust structures. ● Promoters should understand that management and ownership of a business is two different phenomena. ● ARC is expected to revive business by extending working capital funds or funds for capital expenditure. They have gone as far as taking efforts in hiring a complete new management to turn around the business.

  3. ● Promoters should also display a sense of responsibility towards the business and originally should bring in a working capital fund because if the business is out of the mud, the ultimate beneficiary will be promoters/owners. ● ARC can help the acquired accounts by providing them backdoor support of advisory by making appropriate suggestions on their product line, new techniques, profitability etc. ● Financial advisors can help by bringing and matching right kind of investors i.e ARCs to the promoters which can be a win-win for both the parties. They play a big role in negotiating terms between the ARC and the promoter by putting them on the table in correct, precise and articulate manner. ● ARCs usually look at two things before taking over an account. It needs to have comfort in the form of security cover and visibility in cash flows. These two factors can be reflected in terms of the debt as a multiple of EBITDA. ● For any buyer price is a function of how much time will it take to resolve the business and get the money back. Because of COVID-19, the time will lengthen and hence expectation of ARC for buying an account will come down very obviously, so there is going to be a price mismatch between the seller of the account and ARC. ►Watch the webinar here: https://www.youtube.com/watch?v=3kKMKc4oWtk&t=400s

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