Srei arm launches fund for stressed assets

Fund will focus on picking up stressed assets of Rs 100-500 cr, can start with an investment magnitude of around Rs 300 cr

Srei Alternative Investment Manager Ltd (SAIML), a Srei venture, is planning to launch a Rs 2,000-crore fund, called the India Vision Fund, with focus on stressed assets. The fund comes at a time when banks are struggling to clean their debt-ridden balance sheets.

Srei has already approached a number of domestic and foreign investors to invest in the fund. It will approach corporate entities, banks, non-banking finance companies, as well as asset reconstruction companies (ARCs), to buy stressed assets.

The fund will focus on picking up stressed assets ranging between Rs 100-500 crore, and can start off with an investment magnitude of around Rs 300 crore, said Nalin Kumar, chief investment officer, SAIML.

India Vision Fund will invest in stressed assets across investment classes, mostly debt and mezzanine (a kind of funding that gives the lender the option to convert to an equity interest), with potential future opportunities. However, as of now, the fund will stay away from investment decisions pertaining to commodity cycles, Kumar said.

"Our efforts will be to optimise the assets through a combination of approach, which includes management oversight and financial engineering, among other things," said Kumar. SAIML expects some of the investments in the fund to give returns over a two-year horizon.  

Notably, in 2012, SAIML, through India Global Competitive Fund (IGCF), had invested in distressed loans of ICICI Bank to the tune of Rs 430 crore in Kingfisher Airlines Limited, backed by securities. The fund later exited from Kingfisher with hefty gains.

"India Vision Fund will primarily concentrate on those companies which can be revived through proper nursing. The fund will purchase assets or loans and invest by way of debt and other instruments, which will be taken over from corporates, banks, NBFCs (non-banking finance companies), or even asset reconstruction companies (ARCs)," said a press release from the company.

On being asked if Srei could be one of the investors in the fund, Kumar said, Srei's investments would be subject to decisions made by Srei's board.  SAIML is the fund management arm of Srei Infrastructure Finance Limited.  At present, SAIML manages about eight funds, with invested corpus of over Rs 1,365 crore, according to the information on the company website.

In October 2015, Srei Infrastructure Finance said it would sell its 18.26 per cent stake (jointly held by Srei and the Kanoria block) in Viom Networks to American Tower Corporation for Rs 2,952 crore. Srei's own consideration, including non-compete fee in the sale would be Rs 1,790 crore.  Notably, Srei's investment in Viom was Rs 1,598 crore, according to an investor presentation from September 2015. In December 2015, Srei announced that BNP Paribas Lease Group, a 100 per cent subsidiary of BNP Paribas Group, had decided to sell its entire 50 per cent stake in Srei Equipment Finance Limited (SEFL) to Srei Infrastructure Finance. In exchange, BNP Paribas acquired five per cent in Srei Infrastructure Finance, which would now be the parent company of SEFL.