The New York-based private equity firm JC Flowers & Co is floating a joint venture with Ashok Wadhwa-led investment bank Ambit Holdings Pvt Ltd to acquire stressed assets in India.
While JC Flowers and Ambit will hold 47.5 per cent each in the proposed asset reconstruction company (ARC) named ‘Ambit Flowers Asset Reconstruction’, former Citibanker and serial entrepreneur Jerry Rao will own 5 per cent in the JV.
In a response to a query, Ambit Holdings CEO Rahul Gupta confirmed the development.
The shareholder agreement between the three has already been signed in this regard and the proposed entity is filing regulatory applications to start operations.
Emails sent to JC Flowers seeking further information did not elicit any response by the time of filing this article. The Times of India was the first to report the development.
“The proposed ARC will have a distress debt fund besides the ARC, with an initial corpus of $100 million pooled into both,” said Gupta, adding, “It will look at picking up significant equity stakes in small- to mid-cap companies and make changes in management control.”
JC Flowers is an American private equity investment firm, focused on investments in the financial services sector. It is said to have invested almost $14 billion across three funds and is now raising a new one.
Rahul Gupta and JC Flowers Asset Management managing director David Moffitt will lead the ARC. Prior to joining Ambit Holdings, Gupta worked with Tokyo-based Shinsei Bank—which was acquired by JC Flowers—as chief financial officer for five-and-and-a-half years.
In India, banks are speeding up the process to offload bad loans after the Reserve Bank of India (RBI) nudged them to clean up their books. The stressed loan book of commercial banks in the country is estimated at Rs 7 lakh crore.
ARCs play an important role in ‘de-stressing’ the banking sector by acquiring illiquid loans from banks and relieving banks of the NPA burden. To fasten the process, the government announced in the Union Budget 2016 that 100 per cent foreign direct investment (FDI) in ARCs will be permitted through the automatic route.
Recently, financial services firm SREI Alternative Investment Managers Ltd, part of Kolkata-based SREI Group, said it is looking to float a Rs 2,000 crore (about $291 million) fund to invest in debt instruments of stressed companies.
Besides, Ajay Piramal-led Piramal Enterprises Ltd is gearing up to launch a fund with a corpus of Rs 6,000 crore (about $887 million) for distressed assets. The fund will seek to invest in potential turnaround companies and provide rescue capital.