1. Legal Due Diligence (LDD)

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• Review of loan documents for creation of security and collateral cover, including enforcement pertaining to primary and collateral securities, enforceability of documents pertaining to guarantors in respect of their liabilities, clarity of title, attachment orders, if any in force. The scrutiny also covers details of actions pending/ contemplated, if any by tax authority.

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2. Borrower Diligence

 

• Collection of market information about the borrowers/guarantors and the financial asset proposed to be acquired.

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• Site visits and inspection of borrower's premises/place of business are carried out either internally or by appointing an external agency.

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3. Financial Diligence

 

• The ARC undertakes valuation of proposed acquisition based on size of the asset, acquisition category and proposed resolution mechanism.

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• Valuation of the FA is carried out internally or through appointment of external agencies. In case of real estate, the applicable rates as per ready reckoner are used as an alternative.

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4. Collateral Diligence

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• When the resolution is expected to be based on sale of underlying securities, site visits are conducted to understand the value, marketability and any other relevant issues regarding the property.

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• Legal & Title Diligence: Verifying the validity of collateral, ensuring the "enforceability of security interest" under the SARFAESI Act, and checking for pending litigations or criminal records of promoters.

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• Operational Diligence: Assessing if the business is still "viable." This includes site visits to verify physical assets and manpower.

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• KYC & Compliance: Verifying the identity of the borrower and beneficial owners to prevent money laundering or collusion with "related parties".