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Brookfield-backed Indostar Capital sells stressed SME loans worth Rs 292 cr

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Abhijit Lele Mumbai

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Indostar Capital Finance Ltd (Indostar) has sold a stressed loan portfolio with principal outstanding at Rs 292 crore to Encore Asset Reconstruction Company as a step to clean up books.

Indostar, which is backed by private equity investor Brookfield, said the sale of the SME loan portfolio comprised several stressed accounts resolved on December 30, 2023 through sale under the Swiss Challenge method. The method involves an interested party presenting a bid to the auctioneer who then calls for counter bids.

Indostar had Rs 7,726 crore in assets under management (AUM) at the end of September 2023. Out of that amount, the company’s SME book was Rs 1,059 crore in the second quarter of Financial Year 2023-24 (FY24).

In August 2023, Indostar divested a portion of its legacy corporate loan book, including credit with overdue amounts between 31 and 89 days totaling Rs 915 crore, to Phoenix Asset Reconstruction Company.

According to its annual report for FY23, it had transferred stressed loans (non-performing assets) to asset reconstruction companies with principal outstanding valued at Rs 481.95 crore involving 4,820 accounts. The transaction was done for aggregate consideration of Rs 232.76 crore. It also sold Special Mention Accounts (3,475) with principal outstanding of Rs 261.41 crore. The deal was done for aggregate consideration of Rs 139.63 crore.

Indostar said in a BSE filing it is making efforts to sell nearly 50 per cent of its stressed assets. The non-banking financial company will explore the option of launching a new SME product focused on lower ticket sizes in Tier-III and Tier-IV markets towards the end of FY24. Till then, the emphasis is to run down the book by way of collection or other arrangements, it added.

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First Published: Jan 01 2024 | 2:53 PM IST

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