Blackstone Group plans to set up an ARC in India

Mumbai: Global private equity firm Blackstone Group is exploring setting up an asset reconstruction company (ARC) in India to tap the opportunity thrown up by bad loans approaching Rs10 trillion, two people aware of the development said.

“Blackstone is keen on the stressed assets space in India. They have been assessing the opportunity for some time and now they are looking to set up an ARC to tap into the growing opportunity and are in talks with experts in the field for the same,” said one of the two people cited above, requesting anonymity as the talks are private.

“As a matter of policy, Blackstone does not comment on media/market speculation,” a Blackstone spokesperson said in an email response to a query.

In June, the Reserve Bank of India named 12 large defaulters and asked banks to initiate insolvency proceedings against them under the insolvency and bankruptcy code. The 12 account for almost a quarter of the bad loans in the banking system and include names such as Monnet Ispat Ltd, Alok Industries Ltd, Amtek Auto Ltd and Essar Steel Ltd.

If Blackstone indeed sets up an ARC, it will be the latest among foreign private equity investors who have spotted the opportunity in stressed assets.

In January, Mint reported that AION Capital Management Ltd, a joint venture between ICICI Bank Ltd and Apollo Global Management, has applied for a licence to form an ARC. US-based stressed asset specialist Lone Star Funds too has applied to the RBI to set up an ARC in India, Mint reported in November.

Global PE funds such as KKR and Co., Hong Kong-based SSG Capital Management and International Finance Corp. (IFC), the investment arm of the World Bank, have already acquired stakes in existing ARCs.

In January 2015, IFC invested in Encore Asset Reconstruction Co. Pvt. Ltd, while in March 2016, private equity major KKR & Co. picked up a stake in International Asset Reconstruction Co. Pvt. Ltd.

Others who have applied for setting up ARCs are global stressed asset specialist JC Flowers and Co., in partnership with Ambit Holdings Pvt. Ltd, domestic financial services firm IIFL Holdings Ltd and Sudhir Valia, the former chief financial officer of Sun Pharmaceutical Industries Ltd.

Large lenders such as State Bank of India (SBI) and ICICI Bank Ltd too have set up platforms to invest in stressed assets.

Last year, SBI tied up with Brookfield Asset Management Inc. to form a joint venture fund for purchasing distressed assets. Brookfield has committed to invest Rs7,000 crore in the venture.

ICICI Bank, through its private equity arm ICICI Ventures, has tied up with Tata Power Co. Ltd; Canadian Pension fund Caisse de Dépôt et Placement du Québec has set up a platform to acquire distressed power assets.

In April, Blackstone India senior managing director and head of Indian private equity at the annual Mint Private Equity Conclave said that the PE firm is entering the private debt market in India .

The firm, which manages about $90 billion in credit globally, will make the investments from a fund managed by its specialized Tactical Opportunities Group. The firm is looking at opportunities such as promoter financing and structured equity for last mile financing.