ARC India: 34.94% of AUM exceeds eight-year write-off horizon

ARC India had Rs 7,040.215 crore of assets under management, or AUM, aged more than eight years as of March 31, 2026, equal to 34.94% of total AUM. The portfolio had crossed the Reserve Bank of India, or RBI, realisation period under which unredeemed security receipts must be treated as loss assets and written off in investors’ books.

How much of ARC India’s AUM has crossed the eight-year write-off horizon?

ARC India reported Rs 7,040.215 crore of AUM aged more than eight years on March 31, 2026, making it the largest of its five disclosed AUM age bands. Total AUM was Rs 20,149.987 crore, and the more-than-eight-years category represented 34.94% of that amount. The next-largest category was AUM acquired up to one year earlier, at Rs 5,618.480 crore.

The age profile shows that Rs 13,109.772 crore, or 65.06% of total AUM, remained within eight years of acquisition on March 31, 2026. ARC India charges management fees or trusteeship fees only on AUM with a vintage below eight years. These fees range from 0.25% to 5.00% of AUM managed by the relevant trust, depending on the commercial terms for each trust.

ARC India’s fee income was Rs 235.549 crore on a consolidated basis in Fiscal 2026, or 53.47% of revenue from operations, compared with Rs 127.596 crore, or 39.09%, in Fiscal 2025. The fee-income increase occurred alongside higher total AUM, but the disclosed fee mechanism means AUM remaining below the eight-year threshold is the relevant base for those charges. New stressed-asset acquisitions and the pace of redemptions can therefore affect the fee-paying AUM base.

What does the eight-year write-off rule mean for ARC India recoveries?

ARC India can continue resolving stressed assets after the eight-year write-off horizon, but security receipts, or SRs, not redeemed within that period must be treated as loss assets and written off in investors’ books. An SR is an instrument issued by a trust to investors against interests in acquired stressed assets. The RBI requires the period for realisation of stressed financial assets not to exceed eight years from acquisition.

ARC India wrote off Rs 71.959 crore in Fiscal 2026 under this guideline, compared with Rs 20.401 crore in Fiscal 2025 and Rs 4.946 crore in Fiscal 2024. Recoveries from AUM that was more than eight years old and/or written off were Rs 365.672 crore in Fiscal 2026, down from Rs 974.463 crore in Fiscal 2025 and Rs 851.995 crore in Fiscal 2024. The Fiscal 2026 write-off amount rose while recovery from this aged and written-off pool fell from both prior fiscal years.

Recovery is not determined by the accounting treatment alone. ARC India identifies resolution under the Insolvency and Bankruptcy Code, 2016, mutual borrower settlements, restructuring or rescheduling debt, enforcement and asset sales under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and proceedings before the Debt Recovery Tribunal. The outcome can be affected by a borrower’s repayment capacity, the collateral’s value and title, claims by creditors with priority, litigation and the time required to sell assets.

How did ARC India’s collections and redemptions change in Fiscal 2026?

ARC India’s AUM increased to Rs 20,149.987 crore in Fiscal 2026 because additions of Rs 5,958.800 crore exceeded redemptions of Rs 2,638.117 crore, even as collections fell from Fiscal 2025. Collections are amounts recovered from stressed assets, while redemption is the repayment of SRs by trusts from recoveries. The distinction matters because collections may not translate into immediate redemption of all outstanding SRs.

Fiscal 2026 collections of Rs 3,484.391 crore were Rs 398.264 crore below Fiscal 2025 collections of Rs 3,882.655 crore, while redemption as a percentage of opening AUM increased to 15.65% from 14.60%. In Fiscal 2024, the redemption rate was 18.20%. Additions in Fiscal 2026 were also more than twice redemptions, which increased closing AUM despite the reduction in collections.

For ARC India’s top 10 stressed portfolios in each fiscal year, gross recovery as a percentage of acquisition was 35.19% in Fiscal 2026, compared with 38.88% in Fiscal 2025 and 26.70% in Fiscal 2024. The Fiscal 2026 ratio was lower than Fiscal 2025 but higher than Fiscal 2024. ARC India reported Rs 5,042.54 crore of recovery during Fiscal 2026 for these top 10 portfolios, against Rs 16,939.08 crore in Fiscal 2025 and Rs 9,316.16 crore in Fiscal 2024.

What do ARC India’s recovery ratings indicate about expected recoveries?

ARC India reported that 98.07% of rated outstanding AUM was rated RR3 or above as of March 31, 2026, compared with 96.92% on March 31, 2025 and 95.44% on March 31, 2024. Recovery ratings are assigned by Securities and Exchange Board of India-registered rating agencies. They indicate expected recovery within the RBI’s stipulated resolution timeframe on a present-value basis.

RR1+ indicates expected recovery of 150% or more of outstanding SR face value, while RR1 indicates 100% to 150%. RR2 represents expected recovery of 75% to 100%, RR3 represents 50% to 75%, RR4 represents 25% to 50%, and RR5 represents 0% to 25%. On March 31, 2026, RR1+/RR1 accounted for 32.83% of rated AUM, RR2 represented 54.75%, RR3 represented 10.49%, and RR4/RR5 represented 1.93%.

The rating mix changed principally through RR2, which rose by 9.80 percentage points from 44.95% in March 2025 to 54.75% in March 2026. RR3 declined from 17.65% to 10.49%, while RR4/RR5 declined from 3.08% to 1.93%. The disclosure states that recovery ratings depend on the selected resolution strategy, cash-flow potential, borrower competence, causes of distress, external conditions, collateral value and expected recovery period.

Recovery ratings do not remove the relevance of the aged AUM because ARC India’s disclosure includes certain SRs older than eight years where RBI guidelines permit a rating. ARC India also states that valuation of its investments in SRs and its management fees are linked to recovery ratings. A shift toward RR4 or RR5 would therefore affect the reported quality of AUM and the valuation-related measures described by ARC India.

Conclusion

ARC India’s Rs 7,040.215 crore of AUM beyond eight years places 34.94% of its March 31, 2026 portfolio outside the RBI’s standard realisation period. Continued recoveries are possible after SR write-offs, but the lower Fiscal 2026 recovery from aged and written-off AUM, alongside a larger write-off amount, makes the conversion of this pool into collections and SR redemptions material to the portfolio’s resolution.

The disclosed measures to watch are recovery from AUM more than eight years old and/or written off, the RR4/RR5 share of rated AUM, and the relationship between acquisitions and redemptions. ARC India added Rs 5,958.800 crore of AUM in Fiscal 2026 and states that sustained revenue and cash flows depend on sourcing stressed assets at appropriate prices and recovering value through its resolution mechanisms.