The Indian banking sector is grappling with $210 billion in bad debts, which is a remnant of the borrowing spree in the aftermath of the global financial crises and the subsequent downturn in the economy. The Insolvency and Bankruptcy Code of 2016 in India gives creditors significant powers to reshape faltering companies. What’s more is that this legislation continues to attract investors and funds from Canada, Singapore, and Hong Kong.
Hong Kong-based SSG Capital Management Ltd. sees enormous opportunities in such distressed assets. Oaktree Capital Group LLC, the largest distressed investor in the world is vying for increased participation in India’s fledgling market. Soo Cheon Lee, Chief Investment Officer of SC Lowy Financial HK Ltd. expects annual returns of 15% from investments in distraught Indian assets.
According to Pallavi Gopinath Aney, a principal at Baker McKenzie Wong & Leow in Singapore, “The change now is that there are more bad debts available to buy as many more names are in restructuring.” She went on to add, “Foreign funds see significant value in problem assets and are willing to bring in management and expertise to run the distressed companies.”
Hong Kong-based SC Lowy Financial sees India as its main market for distresses debt in Asia. The firm’s CIO, Soo Cheon Lee further adds that it is easier to do business in India than in China, where local partnerships are usually required.
“The introduction of the bankruptcy law has brought the benefit of debt resolutions with deadlines for foreign funds,” said Aney at Baker McKenzie Wong & Leow.