Global investors line up for stressed assets

Piramal Enterprises, Bain Capital, Apollo Global, Brookfield Asset Management among those looking to collectively invest at least $2 bn to buy stressed assets


Canadian pension fund Caisse de Dépôt et Placement du Québec has signed a long-term partnership with Edelweiss Financial Services to invest Rs5,000 crore in stressed assets over the next four years. Photo: Reuters
Canadian pension fund Caisse de Dépôt et Placement du Québec has signed a long-term partnership with Edelweiss Financial Services to invest Rs5,000 crore in stressed assets over the next four years. Photo: Reuters

Global investors are queuing up to acquire stressed assets or debt of troubled companies in India if the spate of announcements in the space is anything to go by.

Piramal Enterprises Ltd, Bain Capital Credit, Apollo Global Management and Brookfield Asset Management Inc. are among those looking to collectively invest at least $2 billion to buy stressed assets in the country.

Most recently, Canadian pension fund Caisse de Dépôt et Placement du Québec (CDPQ) signed a long-term partnership with Edelweiss Financial Services Ltd to invest approximately Rs5,000 crore (nearly $750 million) in stressed assets and specialized corporate credit in India, over the next four years.

Last month, Renuka Ramnath-led PE fund Multiples Alternate Asset Management Pvt. Ltd told Mint it is in the process of venturing into stressed assets investment.

Besides, private equity funds such as KKR and Co., Hong Kong-based SSG Capital Management and International Finance Corp. (IFC), have already acquired stakes in existing asset reconstruction companies (ARCs) to buy bad loans.

The funds are expecting distressed asset investment opportunities to increase in India over the next few years.

These funds are considering buying companies which are unable to pay their debt, hoping to restructure them to make them profitable.

Some investors are looking to buy troubled loans and sell them later at a profit, or converting them into equity once the companies are restructured.

“Special Situations funds and distressed funds are increasingly seeing meaningful investment opportunities in India today. Restructuring of debt/interest payouts and provision of working capital as the case requires results in these assets becoming operational. Funds have put in experienced management teams and unlocked operations with a more benign debt repayment schedule which will result in some remarkable turnaround stories,” said Manisha Girotra, chief executive officer, global investment bank Moelis and Co. India.

Stressed assets include both non-performing loans (NPLs)—defined as those that have not been serviced for 90 or more days—and restructured or rolled over loans, where banks have eased interest rates or the repayment period.

To clean up balance sheets, banks will need to sell these loans to asset reconstruction firms and distressed asset funds.

“In India, implementation of the bankruptcy code, ongoing streamlining of regulatory and approval processes, (and) stronger labour laws will result in an active stream of alternate capital entering India to take control of distressed situations and produce turnaround stories,” Girotra added.

The new bankruptcy law, which significantly changes the investing environment, in particular, is also expected to help investors and make it easier to wind up a business and strengthen the rights of debt holders. “The key question is whether the underlying operations can be turned around, and with the Indian economy back on the growth track, a friendly regime for business, and no significant global upheavals expected, the conviction on part of the investors is higher than ever. Without a doubt, India stands out from among the BRICS at the moment, and many other emerging markets,” said Sanjeev Krishan, partner and leader-private equity and transaction services, PricewaterhouseCoopers Pvt. Ltd.

To be sure, while several funds have announced intent to invest, not many deals have happened yet.

“Admittedly, turning around businesses is not an easy proposition—at the same time, the joint approach where a global investor joins hands with a large Indian business house would be helpful, in particular providing the local market expertise. In addition, most of the last funds have deep operating expertise these days, so a combination like this is best positioned to turn assets around,” Krishan added.

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