Arcil raises $75m for Indian distress

The firm has lowered its final target to $500m in line with market conditions.

Asset Reconstruction Company of India (Arcil) has held a first close on $75 million on its private equity fund focusing on the acquisition of distressed assets from India’s banks, a source close to the firm told sister magazine PEI Asia.

The money was raised from both foreign institutional and domestic investors, said the source, with Arcil itself committing around 25 percent of the capital.

Arcil Asset Reconstruction Fund – II, which was launched in Q1 2009, is expected to reach a second close in May this year, with a final close slated for Q3 2010, the source added.

The target for the fund, which will be used for cash purchases of non-performing assets along with underlying securities from banks, has been scaled down to $500 million from the $600 million launch target. The revised target is half the size of the $1 billion distressed fund Mumbai-based Arcil was reported to be planning by various Indian media sources in August 2008.

The drop in target was attributed by the source to several factors including the poor fundraising environment and diminished LP appetite for new commitments, the increased demand in the market for distressed assets, and the fact that improving economic conditions mean the flow of suitable assets is predicted to slow as 2010 advances.

Arcil's first fund focused on this space was raised in December 2007 and reached $65 million, with all the capital coming from domestic sources. The fund was fully invested within three months.

2009 saw distressed or special situations investments in India open up to third party investors. In fact, the Arcil fund is one of three institutional funds currently in the market raising capital for this sector.

In October last year specialist investment firm Halcyon launched its first third party fund, Halcyon Special Situations India Fund, with a $200 million target. The firm plans to reach a first close by the end of Q1 2010 and will seek “stressed and distressed companies in the middle market”, managing director at the firm, Paresh Mashru told PEI Asia at the time.

In December, Mumbai-based Edelweiss held a $105 million first close on its maiden private equity fund targeting special situations investments. No further details about the fund, including target size and strategy, are known.