ARCIL Q2 CONCALL: EXPECTS STRONGER H2 ACQUISITIONS; TARGETS EXPANSION IN RETAIL & SME ASSETS, PLANS TO SCALE COLLECTION-AS-A-SERVICE BUSINESS

• **H2 FY27 Outlook:** Management expects stronger acquisition activity in H2, supported by seasonal asset sales from banks and NBFCs and a healthy acquisition pipeline. • **Acquisition Seasonality:** Management indicated that approximately 60% of acquisitions historically occur during H2, as lenders accelerate stressed asset sales ahead of the financial year-end. • **AUM Growth Outlook:** Management expects to continue its historical growth trajectory but has not provided specific FY27 or long-term AUM guidance. • **Corporate Acquisition Strategy:** Company plans to expand its corporate distressed asset portfolio, particularly mid-sized assets with sound underlying value and attractive resolution potential. • **Retail & SME Expansion:** Management intends to increase the contribution of retail and SME assets, supported by technology-driven underwriting and collection capabilities. • **Collection-as-a-Service:** Company has initiated pilots with a couple of banks and NBFCs and expects to scale the service during H2 FY27. • **Microfinance Opportunity:** Management is selectively evaluating stressed microfinance portfolios but has not committed to large-scale acquisitions in this segment. • **Acquisition Pipeline:** Management highlighted a healthy pipeline across corporate, retail and SME portfolios, with adequate capital available to pursue opportunities. • **Industry Opportunity:** Management estimates total stressed assets across banks and NBFCs at approximately ₹23.7 lakh Cr in FY26, including NPAs, written-off loans and special mention accounts. • **ARC Industry Penetration:** Management estimates that ARCs currently acquire less than 10% of the available stressed asset pool annually, leaving substantial scope for industry expansion. • **Market Share Growth:** Company's share of industry AUM increased from 11% in FY24 to 15% in FY26, while its share of industry acquisitions increased from 6% to 17%. • **AUM Performance:** AUM increased 21% YoY to ₹20,274 Cr as of September 2026, compared with ₹16,784 Cr a year earlier. • **AUM Composition:** Corporate assets contributed approximately 66% of AUM, retail 25% and SME 9%. • **Retail AUM Milestone:** Retail AUM crossed ₹5,000 Cr during H1 FY27, supported by growing acquisition opportunities in unsecured and secured retail portfolios. • **Dues Under Management:** Total dues under management increased approximately 20% YoY to ₹1.40 lakh Cr. • **H1 Acquisitions:** Distressed asset acquisitions increased 18% YoY to ₹1,707 Cr, compared with ₹1,445 Cr in H1 FY26. • **Q2 Acquisitions:** Acquisitions increased 43% YoY to ₹1,354 Cr, compared with ₹949 Cr last year and ₹353 Cr in Q1 FY27. • **Acquisition Mix:** Of approximately ₹1,700 Cr acquired during H1, around ₹700 Cr related to corporate assets and ₹1,000 Cr to retail and SME assets. • **Capital Deployment:** Company invested ₹718 Cr of its own capital in H1 acquisitions, representing approximately 42% of the acquisition amount, compared with 33% in the previous year. • **Acquisition Structure:** A substantial majority of recent acquisitions were structured security-receipt transactions, alongside selective all-cash acquisitions. • **H1 Recoveries:** Recoveries increased 21% YoY to ₹2,135 Cr, compared with ₹1,765 Cr in H1 FY26. • **Q2 Recoveries:** Recoveries stood at ₹1,069 Cr versus ₹1,339 Cr YoY, reflecting the timing of large corporate resolutions. • **Security Receipt Redemptions:** H1 security receipt redemptions reached ₹1,583 Cr, with the cumulative redemption ratio improving to approximately 52% from 50.8% in March 2026. • **Fee Income Outlook:** Management indicated that quarterly fee income has stabilized around ₹115–120 Cr, supported by AUM growth and higher collections. • **Annual Fee Income Run Rate:** Management highlighted an annual management fee income run rate of approximately ₹450 Cr, compared with roughly ₹200 Cr in earlier years. • **Investment Upside Income:** Management indicated that investment upside income has consistently exceeded ₹200 Cr annually over the last 2–3 years and expects continued contributions from all-cash acquisitions. • **Revenue Mix Outlook:** Management expects fee income and investment upside income together to contribute approximately 70–80% of overall revenue. • **Writeback Income:** H1 writebacks contributed materially to earnings. Management expects writebacks to remain part of recurring business activity, although H2 contributions could be lower than H1. • **Resolution Cycle:** Management indicated that recoveries from retail portfolios generally occur over approximately 3–4 years, while corporate recoveries can vary significantly between quarters. • **Asset Acquisition Pricing:** Management indicated that unsecured retail assets are generally acquired at single-digit percentages of outstanding dues, while secured portfolios are acquired around the mid-40% range. • **Balance Sheet Strength:** Company reported net worth of ₹3,337 Cr, with capital adequacy of 70.5% and debt-to-equity of 0.37x as of September 2026. • **Borrowings:** Total borrowings increased to ₹1,224 Cr from ₹1,100 Cr QoQ, primarily to fund higher acquisition activity. • **Return Ratios:** Annualized H1 return on equity stood at approximately 18%, while return on assets was 12.6%, compared with FY26 levels of 14% and 10.6%, respectively. • **H1 Financial Performance (Standalone):** Total income increased 48% YoY to ₹516 Cr, while PAT increased 54% YoY to ₹290 Cr. • **Q2 Financial Performance (Standalone):** Total income stood at ₹240 Cr, while PAT increased 23% YoY to ₹146 Cr. • **Consolidated Financials:** H1 consolidated total income stood at ₹496 Cr, with PAT of ₹219 Cr. Management advised investors to focus on standalone performance and longer-term trends when evaluating the business.

ASSET RECONSTRUC CO (I) L

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