Distressed debt manager Oaktree exploring first India investment

By Elzio Barreto

HONG KONG (Reuters) - Oaktree Capital Group LLC, the world's largest distressed debt asset manager, is looking to make its first ever investment in India, focusing initially on direct lending for real estate projects, a top company executive told Reuters.

The company, which has invested in Chinese non-performing loans (NPLs), Japanese equities as well as Australian private equity and distressed debt, had looked at India before, but had yet to make an investment in the country, said Rajath Shourie, co-portfolio manager in Oaktree's distressed debt team.

"We have people who are actively exploring (in India)," Shourie said in an interview on Wednesday. "Historically in new countries, office real estate is easier to get our arms around first and where we would start, that would be a reasonable guess."

When Oaktree looked at India previously, the returns did not justify the risks, partly because of volatility in the local currency and uncertainties over its legal system, he said.

India's government earlier this year eased rules for bad-loan buyers. Companies including J.C. Flowers & Co LLC, Apollo Global Inc and Brookfield Asset Management Inc have flocked to the country as local banks were ordered to clean up an estimated $120 billion of bad and troubled loans.

In China, most of Oaktree's investments in NPLs have been small to test the market, but the firm is "encouraged by our experience so far," he said. Oaktree is also looking at real estate direct lending in Australia, he said.

"China is definitely a focus, Australia also. Japan is a possibility as well," Shourie said, adding that stock market valuations there were quite reasonable, given improved corporate governance and outlook for the country after economic measures implemented by Prime Minister Shinzo Abe, known as "Abenomics."

Oaktree was "very active" in buying oil and gas distressed debt in the United States at the beginning of 2016 and sold part of the assets after a rally in the market, Shourie added.

He also said the election of Donald Trump as U.S. President will likely create a sell-off in equities and credit, but the outlook is less clear in the longer term.

"We don't really know what a President Trump's policies would be. Some of the things he says are actually quite business-friendly, however, his position on trade is clearly not," Shourie said. "I think the outcome will depend on what part of his rhetoric actually turns into policy."

(Reporting by Elzio Barreto; Editing by Lisa Jucca and Christopher Cushing)