IARC is a ‘Secured Creditor’ under SARFAESI Act and a ‘Financial Institution’ within the Recovery of Debts Due to Banks and Financial Assets Act, 2002. IARC has certain rights under both these Acts for recovery of debt, including the right to seek legal remedies for recovery of debt through the Debt Recovery Tribunal. Being a secured creditor under the SARFAESI Act, IARC is empowered to adopt either of the resolution strategies or a combination thereof for recovery from non-performing debts and loans, post acquisition of financial asset in accordance with and subject to Reserve Bank of India guidelines. Following are the resolution strategies adopted by IARC:
• Reconstruction and restructuring of Borrower companies, whose debts have been acquired – this includes restructuring of debt to sustainable levels taking into consideration the cash-flow generation capability of the borrower. The strategy is normally adopted where the operations of the Borrower are found viable as also the willingness of the borrower management in having its operations restructured.
• Sale of business – includes selling/ hiving-off/ spinning part of operations of the borrower into a new venture and disposing off the same to interested buyers. This strategy is normally adopted to hive-off/ spin/ sell non-core operations of the borrower to raise funds to restructure operations.
• Merger & Acquisition – including selling the borrower’s business to potential investors, who are interested in the acquisition.
• Sale of Assets – including selling of assets, immoveable and movable, of the borrower, whether as a block or on piece-meal basis
• Settlement of dues by entering into an arrangement with the borrower
The choice of the resolution strategy to be adopted by IARC is driven by value maximization objective for the investors and depends on, inter alia, the condition and status of the business, assets of the borrower, and capability of the promoters/management, as illustrated below.