Cumulative recovery rate of SRs for ARCs to jump for second straight year: Crisil
Domestic rating agency Crisil in its latest report has said that the cumulative recovery rate of security receipts (SRs) for asset reconstruction companies (ARCs) is set to jump for the second straight year on the back of better show in infrastructure sector and other factors. It stated the cumulative recovery rate of security receipts is likely to jump by up to 15 percentage points per annum, touching 75-80 per cent by FY26.
It attributed the improvement to healthy performance of stressed assets in key infrastructure sectors like real estate, thermal power and roads; higher share of retail and low vintage assets; and lower growth in new acquisitions in comparison to incremental recoveries. It said improving performance of stressed assets in these infrastructure sectors and the deterrence effect of the Insolvency and Bankruptcy Code (IBC) are impelling debt restructuring, which is emerging as a most-preferred resolution strategy and a win-win for both promoters of the stressed assets and ARCs.
The rating agency said it analysed Rs 38,000 crore worth of security receipts to arrive at the estimates. Next fiscal, out of an expected recovery of Rs 12,000 crore for Crisil-rated SRs, about half will be from stressed assets in the real estate, thermal power and roads sectors as against 34 per cent in FY25. Its senior director Mohit Makhija said three factors responsible for the rising ARC cash flows have converged in the past 2-3 fiscal years. He elaborated that stressed residential real estate projects have turned viable as property prices rose and inventories declined in the top six cities, while thermal power plants have seen demand growing amid adequate coal availability and timely payment by discoms.
