Good times, bad debt

25 May 2016 By Una Galani Follow @ugalani

Global funds such as KKR and J.C. Flowers are eyeing stressed assets. Indian authorities are pressuring lenders to acknowledge bad loans and, in turn, raise capital. A new bankruptcy code helps too. After years of false starts, India’s bad debt business could finally take off.

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India’s Punjab National Bank on May 18 reported an $802 million net loss for the quarter ending in March, due to a surge in provisions for non-performing loans. The loss was the largest ever for an Indian bank.

In March, Kotak Mahindra Group and the Canada Pension Plan Investment Board (CPPIB) agreed to invest up to $525 million in stressed assets in the country’s banking and corporate sectors.

New York-listed private equity firm KKR also recently won approval to buy a stake in International Asset Reconstruction Co, a leading player in investing in non-performing loans, which counts Tata Capital and HDFC Bank as its largest shareholders.

Separately, Indian billionaire Ajay Piramal’s Piramal Group has also said it intends to set up a $1 billion fund to invest in distressed assets.

J.C. Flowers also recently announced a joint venture with Indian financial services group Ambit Holdings to invest in distressed debt in India.

The Reserve Bank of India has asked banks to disclose and provide for all their bad debt by March 2017.

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