Kolkata: India’s largest asset restructuring firm, Asset Reconstruction Co. (India) Ltd, or Arcil, has formed a partnership with mjunction Services Ltd—a 50:50 joint venture between Tata Steel Ltd and Steel Authority of India Ltd (SAIL)—for disposal of repossessed assets through electronic auctions.
Mjunction was founded in 2001 to sell steel and coal through electronic auctions, but over the past one year, it has developed expertise in selling industrial assets as well. It cut its teeth in the business by selling idle assets worth at least Rs300 crore for SAIL and Tata Steel, and has now launched a separate division called valuejunction.
The partnership between Arcil—India’s first asset reconstruction company—and mjunction took off earlier this month with the latter auctioning 10 repossessed flats in Mumbai. The sale raised Rs1.08 crore in all, which was 29% more than the combined reserve price of the flats.
Price discovery: S. Khasnobis of Arcil says it is far more cost-effective to sell through online auctions. Abhijit Bhatlekar / Mint
Mjunction will soon auction 13 more flats for Arcil, which has decided that it would sell all “tangible assets” such as homes, cars, factories and machines seized from defaulters only through electronic auctions. Soon mjunction will start auctioning industrial assets as well for Arcil.
Also in the pipeline are unfinished farmhouses in the hill resort of Ooty and commercial properties in Chennai and Mumbai.
“It is far more cost-effective to sell through online auctions,” said S. Khasnobis, Arcil’s managing director and chief executive officer. “Also, online auctions are more transparent and attract buyers from across the country.”
The partnership with mjunction is for two years. Arcil is likely going to enlist more partners for e-auction of repossessed assets. “They (mjunction) are going to be one of our partners for conducting e-auctions for the next two years,” said Khasnobis, adding that the agreement with mjunction does not preclude partnership with others.
Mjunction, on the other hand, says it has been approached by a number of private banks for conducting e-auction of assets seized from defaulters.
“Banks are beginning to realize that e-auctions lead to better price discovery,” said Viresh Oberoi, mjunction’s managing director.
Mjunction’s services include “market making”, which it does for its clients in unique ways. “For instance, for the 13 small flats (in Mumbai), that Arcil wants us to sell, we will distribute leaflets among potential bidders in the neighbourhoods of these flats, spread the news about the forthcoming auction through local grocery shops and so on,” said Arunava Mandal, head of valuejunction. For its services, the company typically charges the seller 1-5% of the sale proceeds as commission.
Having sold for its promoters assets as diverse as aircraft, vintage cars and a fertilizer plant, mjunction is now offering its services to retailers trying to free up shelf space and overseas companies looking to sell used industrial assets in India.
Mjunction is soon going to conclude a partnership agreement with a “large retail chain with a focus on grocery items” for disposal of its surplus inventory through e-auctions. Alongside, two manufacturing companies, one based in Singapore and the other in Thailand, have proposed to sell used plants and machines through mjunction, according to Oberoi.
“With India signing free trade agreements with Asean countries, more and more companies from the Far East would try to sell used plants and machines in India,” he added. Asean is short for the Association of Southeast Asian Nations.