Asset Reconstruction Company (India) Limited is launching an IPO. They runs India’s oldest asset reconstruction business, buying stressed loans from banks and financial institutions, then working to recover value from them through debt restructuring, recovery, or one-time settlements, across corporate loans, SME and other loans, and retail loans.
IPO Summary
Introduction
India’s retail loan stress has roughly doubled in six years. Banks and non-bank lenders together carried Rs 3,46,950 Cr of retail stress in Fiscal 2020. By FY26, that figure had grown to Rs 6,96,400 Cr, a compound growth rate of 12.3% a year.
A new rule adds urgency. From April 2027, the Reserve Bank of India’s expected credit loss framework will force banks to set aside close to 5% against loans that are only 30 to 90 days overdue, up from about 0.4% today. Banks facing that jump in provisions have a clear reason to sell stressed loans before the rule takes hold.
This is the market that Asset Reconstruction Company (India) Limited, ARCIL, operates in. Set up in 2002, ARCIL is the second largest ARC in India by AUM. It also was India’s first asset reconstruction company.
ARCIL is coming to market with an IPO consisting of a 100% Offer for Sale of ~₹733 Cr, from 9th to 11th Sep, 2026.
Business Model
Banks and financial institutions prefer not to hold loans that borrowers have stopped repaying. Rather than chase these loans on their own, many sell them to an asset reconstruction company (ARC). ARCIL buys these stressed loans, works to recover value from them, and earns money for doing so.
The process works like this. A bank agrees, after a bidding round, to sell a loan or a pool of loans to ARCIL. ARCIL sets up a trust for the deal. The trust issues security receipts, called SRs, to investors known as qualified buyers (QBs), which include banks, non-bank lenders, insurance companies, and mutual funds.
Money raised from these SRs pays the selling bank. Ownership of the loan then passes to the trust.
ARCIL must hold a minimum stake in the SRs it issues, at least 15% of what the seller invests, or 2.5% of the total SRs issued, whichever is higher.
It then works to recover the debt. It restructures loans, sells the security behind them under the SARFAESI Act, pursues defaulters through the Debt Recovery Tribunal, uses the Insolvency and Bankruptcy Code for large corporate defaults, or settles for a lump sum through a one-time settlement.
Retail loans, where amounts are small and borrowers many, rely increasingly on technology and data analytics rather than case-by-case litigation.
Money recovered pays ARCIL’s fees and expenses first. What remains redeems the SRs, in proportion to each investor’s holding. SRs not redeemed within eight years must be written off.
ARCIL earns money two ways.
- Fee income: Includes management, collection, and resolution fees, charged as a percentage of the assets it manages.
- Investment income: Includes the gain on the SRs it holds itself, once the underlying loan is resolved for more than ARCIL paid for it.
How much of each ARCIL earns depends on the deal structure.
In cash acquisitions, ARCIL buys all the SRs itself and keeps the entire upside, so its revenue there is almost all investment income.
In co-investor and ordinary SR deals, other investors hold SRs alongside ARCIL, and ARCIL earns both fee income plus investment income.
In structured deals, ARCIL’s return is capped, so most of what it earns comes from fees.
ARCIL classifies the loans it buys into three verticals:
- Corporate loans,
- SME and other loans, and
- Retail loans
As of March 2026, ARCIL ran 13 offices across 12 states, employed 206 people, and worked with 218 registered valuers, 206 collection agents, and 988 empanelled lawyers to run its recovery process.
Market Share of Asset Reconstruction Companies in India (FY25)
- The ARC landscape is undergoing a significant reshuffle, marked by the rapid rise of government-backed NARCL, which grew its market share from 3% in FY23 to 18% in FY25, largely at the expense of established private players like Edelweiss ARC.
- While legacy players like Edelweiss ARC have seen market share contract sharply—dropping 16 percentage points over the period—ARCIL has maintained relative stability, rebounding to 13% in FY25, demonstrating resilience in a consolidating market.
Operating Metrics
- AUM crossed Rs 20,000 Cr in FY26, up 32.3% over two years, with retail’s share nearly doubling from 12.75% to 23.55% of the book. ARCIL is deliberately reweighting away from corporate loans, where new stressed asset supply has slowed.
- ARCIL’s own investment as a share of total AUM rose steadily to 22% in FY26, up from 18% two years earlier. The company is putting more of its own capital behind the deals it manages, rather than relying on other investors.
- Structured acquisitions, where ARCIL’s return is capped but fee income is higher, now make up 56% of AUM, up sharply from 37% in FY24. Structured acquisitions give way for steadier, more predictable fee income, meaning less volatile revenue streams.
The Financial Stuff
- Profit After Tax rose from ₹305 Cr in FY24 to ₹408 Cr in FY26, a CAGR of 16%, even as Adj. EBITDA fell.
- Unrealised fair value gains (a non-cash mark-to-market item, which is basically the fair market value of the SRs), added ₹195 Cr to PBT in FY26. In FY24 the same line was a loss of ₹26 Cr.
- Finance Costs rose from ₹5 Cr in FY24 to ₹36 Cr in FY26, a ~7x increase.
ARCIL’s Peers (FY25)
- ARCIL’s core operating margin of 77% is the highest in the peer set, ahead of Edelweiss ARC and Phoenix ARC, even though ARCIL’s revenue base is roughly a third of Edelweiss ARC’s and smaller than Phoenix ARC.
- ARCIL’s PAT Margin of 74% is more than double Phoenix ARC’s 36% and Omkara’s 10%, and stands out further relative to JM Financial ARC’s -9.02% loss margin.
- ARCIL’s D/E Ratio of 0.11x is the lowest in the set, a sixth of ACRE’s 1.14x and a seventeenth of Omkara’s 1.85x, leaving it the least leveraged player in the industry.
Key Risks
- Corporate loan concentration: Corporate loans still made up 69% of AUM as of FY26. As corporate NPAs in the banking system decline, so does new corporate stressed-asset supply. Edelweiss ARC’s AUM fell 37% between FY23 and FY25 for this very reason.
- Aged assets: ~35% of the total book has been held for more than eight years. Under RBI rules, unresolved security receipts past that mark must be written off unless qualified buyers holding 75% of the SRs vote to extend.
- Rising leverage: Despite being the least leveraged among peers, D/E actually still rose from 0.0×6 in FY24 to 0.39x in FY26, as Finance Costs surged. If this continues, ARCIL’s low-cost funding advantage over peers will narrow.
- Sponsor concentration: Avenue India Resurgence Pte. Ltd holds ~70% of ARCIL’s equity and SBI holds ~20%. ARCIL’s low cost of funds and its record of meeting capital requirements ahead of regulatory deadlines both draw heavily on this sponsor backing.
- Legacy litigation: ARCIL is named in at least five ongoing criminal proceedings tied to loans it acquired years or decades ago, arising from actions taken by the original lender before the debt was assigned to ARCIL. None were filed by ARCIL itself, but the company remains a party to each until it is resolved.
Conclusion
ARCIL is India’s oldest asset reconstruction company and, by AUM, it’s the second largest, built on a low debt base, and a growing pivot toward retail stressed loans. But FY26 also showed the cost of that growth. Leverage nearly quadrupled, aged assets moved closer to a mandatory write-off, and over a third of profit came from a paper gain rather than cash recovered.
