Data & Intelligence
Foreign Investment in Distressed Debt in India: What’s the Best Vehicle?
By Ganesh Rao, Partner and Pallabi Ghosal, Senior Associate, with assistance provided by Nayan Banerjee, Associate, AZB & Partners
As India’s economy has grown, so has its stressed assets. Stressed assets, which comprise non-performing assets (NPAs), restructured loans, and written off assets, account for about 16.6% of total loans, which is the highest level out of all major economies. This problem is acute in assets related to industries such as infrastructure, steel, iron, and cement. With the Indian government and the Reserve Bank of India (RBI) mandating Indian banks to clean their balance sheets and makingefforts in bringing regulatory reforms in participation in the debt market and improving security enforcement process, foreign investors have patently made a bee-line to participate in the Indian distressed market through the use of investment vehicles. Today, there are 3 potential investment vehicles in India that foreign investors could choose from: (a) Alternative Investment Funds (AIFs), (b) Asset Reconstruction Companies (ARCs), and (c) Non-Banking Finance Companies (NBFCs). The decision on which vehicle to choose largely depends on 2 parameters: (a) the kind of instruments that foreign investors want exposure to, and (b) the level of control that foreign investors wish to exercise in identifying assets and their ultimate resolution.
Renuka Ramnath | Founder, Managing Director & Chief Executive Officer, Multiples Alternate Asset Management Private Limited
Brian Lim | Partner and Head of Asia and Emerging Markets, Pantheon Ventures
David Rubenstein | Co-Founder and Managing Director, The Carlyle Group
Dr. Andrew Kuper | Founder and CEO, LeapFrog Investments
Torbjorn Caesar | Senior Partner, Actis
Drew Guff | Managing Director & Founding Partner, Siguler Guff & Company