Mumbai: London-headquartered emerging markets hedge fund Emso Asset Management Ltd, which manages $5.8 billion in assets worldwide, is entering India’s growing corporate restructuring market. Mumbai-based distressed assets investor Eight Capital Management LLC, which was co-founded in 2005 by former Deutsche Bank and JP Morgan executive Ravi Chachra, will be its local partner.
When contacted, an Emso spokesperson said that the partnership will target the $140 billion stressed assets undergoing insolvency proceedings under India’s insolvency and bankruptcy code. The spokesperson, however, did not disclose the size of the proposed fund.
One person familiar with the development said that the partnership will target 10-15 transactions in the distressed assets space with deal sizes up to $50 million. A request for comment to Eight Capital remained unanswered till press time.
“Investments will be made through a combination of equity and debt instruments," said the person cited above. “The investments will happen through an India-based Alternate Investment Fund (AIF)."
Eight Capital was one of the early entrants in India’s distressed assets space. Its first fund, Eight Capital Special Situations and Distressed Fund, was launched in January 2006, seeded by JP Morgan, to address the pent-up demand for high-yield capital from Indian companies with an objective to provide investors superior equity-like returns, while providing a cushion on downside risk.
The fund targeted viable distressed assets or healthy assets trading at distressed prices, including convertible bonds and restructured equities issued by Indian companies. Since inception, the fund has deployed over $500 million in credit and distressed investment opportunities in India across more than 11 listed and unlisted Indian companies.
Its second fund, Eight Capital India Recovery Fund, plans to acquire 10-15 asset-rich companies with revenues of $150-300 million, and Ebitda margins of 10-20%.
Emso was founded in 2000 by Mark Franklin, a former Salomon Brothers partner, who also had a stint in Citigroup. In 2013, Emso underwent change of ownership following an employee buyout led by Franklin and became an independent, fully employee-owned asset management company.
The emerging opportunities in stressed assets space fuelled by the Insolvency and Bankruptcy Code (IBC) has led to the creation of several partnerships between global investors and Indian players.
In August, Aditya Birla Capital Ltd (ABCL), the financial services arm of Aditya Birla Group, announced a joint venture with US-based alternative assets manager Varde Partners to invest in distressed assets in India. Both partners will invest in ABCL’s newly incorporated asset reconstruction company, which had received Reserve Bank of India approval in September 2017.
In July 2017, Piramal Enterprises Ltd had entered into a joint venture agreement with Bain Capital Credit India Investments to invest in distressed assets.
On 12 February, the RBI had ordered lenders to begin bankruptcy proceedings against defaulters before the National Company Law Tribunal (NCLT) if they fail to make interest payment within 180 days of missing a payment. According to industry estimates, about 150 companies owing at least ₹ 2,000 crore, each, are under the resolution process.