Piramal Enterprises Ltd has tied up with Bain Capital Credit to jointly invest in distressed assets in India, as the billionaire Ajay Piramal-led company moves forward with its plans to back businesses that require restructuring after scrapping a similar venture.
The Indian company said on Tuesday it has signed a pact with the global credit affiliate of private equity firm Bain Capital to form a platform that, once finalised, will invest capital directly into businesses or acquire debt of such businesses to drive restructurings.
“We think the recent banking reforms focused on effective and timely resolution of stressed assets augers well for players like us,” Piramal said in a statement.
The company didn’t specify the amount the platform planned to invest in stressed assets but said the partners believe there is an investing opportunity of more than $1 billion in this segment over the next few years.
The platform will look at all sectors other than real estate as an asset class and will prefer to invest in businesses that require restructuring and have fundamentally strong growth prospects linked to India’s infrastructure and consumption needs.
The move comes after the Indian healthcare and financial services company ended a partnership with Nirmal Gangwal, managing director and founder of Brescon Corporate Advisory, to launch a fund with a corpus of Rs 6,000 crore for distressed assets.
Piramal and Bain join a raft of companies looking to invest in stressed assets that the Reserve Bank of India estimates has touched $120 billion, or 11.5% of local banks’ total loans, as corporate borrowers—especially in infrastructure and commodities sectors—struggle to repay debts.
Canada's Brookfield Asset Management Inc plans to invest Rs 7,000 crore into a joint venture with State Bank of India to invest in distressed assets. US private equity firm JC Flowers & Co is floating a joint venture with investment bank Ambit Holdings Pvt Ltd and Kotak Mahindra Bank has launched a $525 million fund with Canada Pension Plan Investment Board (CPPIB) to invest in stressed assets.
International Finance Corporation has set up platforms with Hong Kong-based investment management firm ADM Capital and global alternative investments firm Apollo Global to invest in stressed assets in Asia and emerging markets.
Piramal Enterprises has named Shantanu Nalavadi, currently managing partner at Piramal Capital, to lead the partnership with Bain.
Piramal Enterprises recorded consolidated revenue of around $1 billion in 2015-16. Its Piramal Fund Management division invests in the real estate sector while the Structured Investment Group provides long-term mezzanine growth capital to capital-intensive businesses. The total funds under management under these businesses are $3.3 billion. The company also has tie-ups with CPPIB and APG Asset Management.
Bain Capital Credit, previously known as Sankaty Advisors, had about $30.4 billion in assets under management as of 31 March 2016. It follows a broad spectrum of credit strategies, including leveraged loans, high-yield bonds, distressed debt, structured products and non-performing loans.
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