The IL&FS group and US-based Lone Star are expecting to jointly invest about $125 million in distressed infrastructure projects in thermal power and the road sectors by the end of the current financial year.
They had signed a pact in February to jointly invest in distressed infrastructure projects, with a capital pool of $550 million. The collaboration could result in asset purchases of up to $2.5 billion. IL&FS executives said jointly they could invest in three projects by the close of FY18. The screening of projects is underway.
IL&FS has an exposure to various segments in power, including thermal power, and the knowhow. There are viable and investment-worthy assets in coal-fired thermal power stations and their operations need to be reworked. Their restructuring will help to turn them around and also generate cash flows for repaying dues, it says.
The preference is for ready assets that require a combination of capital and managerial capability. Making transactions and effective resolutions will need a close coordination between various arms of the IL&FS group.
Industry analysts said the roll-out of the Insolvency and Bankruptcy Code (IBC) was a key step for reforming and resolving distressed assets, especially corporate and infrastructure accounts. Sensing opportunities in this space in India, many global distressed loans and vulture funds have tied up with Indian financial sector players and business houses. Some such alliances are J C Flowers & Co and Ambit Capital, and Bain Capital and the Piramal group.
ICICI Bank has an alliance with private equity firm Apollo Global Management and AION Capital Management. Most of them are focusing on streamlining the operations of borrowers, facilitating deleveraging, and arranging additional funding.
Many are forming consortiums to bid for assets put on sale by lenders. They include the 12 cases referred to by the Reserve Bank of India for resolution under the IBC. These companies include units in steel, power, auto, and real estate.
The current environment provides opportunities to invest in quality assets that have been affected due to over-leveraging, funding shortfall, or management weaknesses. Lenders are seeking to resolve issues in such non-performing assets by selling them to investors having financial and managerial strength.