Asset Reconstruction Company (India) Ltd (ARCIL) is looking to move beyond buying stressed loans and tap the early-stress segment by launching a collections-as-a-service business, targeting loans that have started showing signs of delinquency but have not yet become non-performing assets (NPAs).
“There is a huge early bucket which is SMA -1 (special mention accounts-1), SMA -2…There is a huge collection of services that need to be given for that, so those are the services we want to provide to them,” Phanindranath Kakarla, ARCIL’s chief executive officer and managing director, told Mint.
SMAs are loan accounts showing early signs of stress, classified as SMA-0 (up to 30 days overdue), SMA-1 (31–60 days overdue) and SMA-2 (61–90 days overdue) before becoming .
The company will provide collection services to “banks and other financial institutions that may not necessarily want to sell us their stressed assets but still have NPA accounts or even early-stage stressed accounts that require collections support,” Kakarla said.
“We already manage nearly 3.5 million NPA customers, which gives us a strong collection infrastructure, an experienced team and wide geographic coverage,” Kakarla said.
ARCIL has already signed up a few clients and expects to begin working with a few institutions shortly, Kakarla said.
It has also identified collections-as-a-service as a new business vertical in its red herring prospectus, filed on 1 September, for its initial public offering (IPO), seeking to build on the collection infrastructure it already operates.
The move comes as the asset reconstruction companies (ARC) industry is increasingly acquiring larger volumes of smaller-ticket retail loans from NBFCs as corporate stressed assets become scarce and retail stress rises.
Mint reported last week that security receipts issued against retail loans comprised 35% of total receipts in fiscal year 2026 (FY26), up from 25% in FY25, highlighting the growing share of retail loan in ARC acquisitions.
ARCIL acquired about ₹5,959 crore worth of financial assets in FY26. Banks accounted for around ₹1,493 crore of these , while non-bank financial companies accounted for ₹4,466 crore.
The company’s strongest growth currently comes from retail assets, particularly those originated by non-bank financial companies, Kakarla said. “Our corporate book is also growing, as are SME and other retail portfolios,” he said, adding that retail and SME assets are likely to account for a larger share of the portfolio as they grow faster than corporate assets.
He said the collections market was fragmented, with different players operating at different stages of the recovery process. ARCIL wants to offer a more integrated solution, using its existing infrastructure, technology and processes.
The company is also evaluating opportunities in . “Microfinance is one asset class where our exposure is currently relatively limited, so we see it as an area of potential opportunity,” Kakarla said.
ARCIL has already acquired a small portfolio of stressed microfinance loans from Ujjivan Small Finance Bank as part of its evaluation of the segment and is assessing the capabilities and operating model required before deciding how significantly to scale up.
ARCIL’s expansion into collections comes as it prepares for its IPO. On Thursday, the company fixed a price band of ₹132-139 per share for the offering, which is estimated to raise up to ₹733 crore.
The issue comprises an offer for sale () of 5.27 crore shares by promoters Avenue India Resurgence Pte Ltd and State Bank of India, as well as existing shareholders Lathe Investment Pte Ltd and Federal Bank Ltd.
“For us, the IPO primarily increases our visibility. I do not think it changes our strategy or the way we execute the business,” Kakarla said.
“We will, of course, become more conscious of quarterly reporting and performance disclosures as a listed company. However, the ARC business is better evaluated over longer periods rather than purely on a quarter-to-quarter basis. So, while the reporting framework changes, our underlying strategy and execution approach will remain the same.”