hope springs
Indian stressed-asset deals will increase this year as bad loans rise and reforms pushed by Prime Minister Narendra Modi’s government start to bear fruit, according to the nation’s top investment banker.
Interest will come from both strategic buyers and private equity firms, said Vishal Kampani, managing director of JM Financial Ltd., the former joint venture partner of Morgan Stanley in India. JM Financial was the No. 1 adviser on Indian mergers and acquisitions in each of the past two years, working on $51.6 billion of deals over the period, data compiled by Bloomberg show.
“The recent rules which grant foreign ownership of asset reconstruction firms and the bankruptcy code will accelerate the pace of mergers and acquisitions in the stressed asset space,” Kampani said.
Stressed assets -- made up of bad loans, restructured debt and advances to companies that can’t meet servicing requirements -- have risen to about 16.6 percent of total loans, the highest level among major economies. The government has overhauled century-old laws that regulate insolvency and allowed foreign investors to take full control of asset reconstruction firms to help rid banks of bad debt that’s holding back credit growth and job creation.
Some large Indian companies have already started to deleverage. The billionaire Ruia brothers agreed in October to sell control of the nation’s second-largest refinery to a group of investors including Rosneft PJSC and Trafigura for about $13 billion including debt. Jaiprakash Associates Ltd., which had defaulted on debt repayments, said last year it will sell cement capacity across five Indian states to UltraTech Cement Ltd. at an enterprise value of 161.9 billion rupees ($2.4 billion).
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