PE funds plan to pump in $100 billion in India's distressed assets market

The distressed assets market in the country is turning out to be big with private equity (PE) funds planning to pump in nearly $100 billion. It is expected to help companies pare debt, given the considerable leverage at certain entities today even as it is to provide growth capital. An indicator of this interest is seen in the secondary market trading in distressed loans.

Between FY17 and FY19, the share of security receipts (SRs) held by institutional investors grew to 58 per cent from 1 per cent, and the share of asset reconstruction companies (ARCs) to 33 per cent from 16 per cent. The assets under management by ARCs is estimated to shoot up to $12 billion in CY19, up from the $1.2 billion in CY13. The number of AIFs has also shot to 518 in February 2019, up from 268 in 2016.

And cash is expected to continue to be a larger proportion of the acquisition cost – in FY19, this accounted for 91 per cent, up sharply from FY16 when the Insolvency and Bankruptcy Code (IBC, 2016) kicked and from the 11 per cent in FY14.