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IDBI Bank, PNB Housing Finance, and Sicom are planning to sell almost their entire distressed loan books, replicating the sale processes undertaken by Yes Bank and Bandhan Bank last year to clean up their books. IDBI Bank is reportedly in talks with special situation funds to acquire as much as ?25,000 crore of non-performing loan book. PNB Housing Finance has invited offers to sell about ?3,000 crore loan book, while Sicom has invited offers to sell 48 accounts with dues of ?9,724.5 crore.
Several Indian financial institutions, including IDBI Bank, PNB Housing Finance, and Sicom, are reportedly working Advertisement
on plans to sell off a substantial portion of their distressed loan books, in a bid to clean up their balance sheets.
Following the example set by Yes Bank and Bandhan Bank last year, who sold a majority of their distressed loan
portfolios to asset reconstruction companies, these institutions hope to start the new fiscal year with a clean slate.
According to sources, IDBI Bank has held talks with special situation funds in recent months, with the aim of selling
as much as INR 25,000 crore ($3.3 billion) of its non-performing loan book. However, the lender has stated that it will
only accept an all-cash deal, meaning that only bidders with deep pockets will be able to participate.
Meanwhile, PNB Housing Finance has invited offers to sell around INR 3,000 crore ($400 million) of its loan book,
comprising 7-8 large accounts. Alvarez and Marsal, the advisory firm working with PNB Housing Finance, has
reportedly shortlisted four to five fund houses for the portfolio sale.
Sicom, the government-owned term lending institution, has also recently invited offers to sell 48 accounts with dues of
INR 9,724.5 crore ($1.3 billion). Sidbi has invited expressions of interest for the portfolio, which is made up of five
pools of loans. The lenders have proposed an e-auction on May 25, and have suggested that they may hold a Swiss
challenge auction if they accept the offer given by the anchor bidder.
Last year, Yes Bank sold almost INR 48,000 crore ($6.4 billion) of distressed loans to JC Flowers Asset
Reconstruction Company, while Bandhan Bank sold INR 13,800 crore ($1.8 billion) in two tranches to Phoenix ARC,
which is backed by Kotak Mahindra Bank. L&T Finance also sold INR 2,707 crore ($360 million) of accounts to the
Asset Reconstruction Company of India, which is backed by Avenue Capital. While L&T Finance and Yes Bank sold
their non-performing assets (NPAs) under the 15:85 structure, Phoenix ARC paid a substantial portion of the
consideration in cash to Bandhan Bank.
The proposed sale of NPAs by IDBI Bank comes at a time when its principal shareholders, the government and LIC of
India, are seeking buyers for their 60.7% stake in the bank. As of the end of December 2022, IDBI Bank had gross
NPAs of INR 23,535 crore ($3.1 billion), which represents 13.8% of its gross loan book. The portfolio of INR 25,000
crore of NPAs that the bank is looking to sell includes write-off loans, and any recoveries from these accounts will
directly reflect in the bank's bottom line.
Overall, the move by these Indian financial institutions to sell off distressed loans is aimed at improving their financial
positions and reducing their exposure to risky assets. By offloading these loans to asset reconstruction companies, they
can potentially recover some of the money owed to them, while also freeing up capital for more profitable ventures.
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