Aditya Birla Capital Ltd and US fund manager Värde Partners have decided to form a joint venture to invest in stressed assets across sectors in India.
As per the deal, Varde Partners will acquire a 50% stake in Aditya Birla Asset Reconstruction Company Ltd, which is currently a wholly owned unit of Aditya Birla Capital. Varde will pay at least Rs 98 crore for the stake.
The two partners will separately invest more in the joint venture, Aditya Birla Capital said in a statement. It didn't specify the amount the two partners will invest. It also didn't say how much the joint venture planned to invest in stressed assets. However, multiple media reports said the JV planned to invest as much as $1 billion (about Rs 7,000 crore) in stressed assets.
“The asset reconstruction business is a strong addition. We see a large opportunity in the distressed space, especially in the mid-corporate segment,” said Ajay Srinivasan, chief executive at Aditya Birla Capital.
According to the statement, the joint venture will leverage Aditya Birla Capital's expertise in financial services and Varde’s capabilities in global credit and value-investing strategies.
Värde manages about $14 billion globally. It has invested nearly $500 million in India over the past five years across stressed, special situations and lending assets, according to the statement.
Värde established a regional headquarters in Singapore in 2008 and expects to open its fifth office in Mumbai later this year, subject to regulatory approvals.
“We see India as a core market and critical part of our long-term strategy in Asia,” said Ilfryn Carstairs, co-investment chief at Värde.
Stressed assets
When Indian authorities started cracking down on banks’ bad loans two years ago, many private equity firms and stressed assets investors sniffed an opportunity. Several JVs have been launched in the last few years, particularly those wherein PE funds are partnering corporate houses.
Piramal Enterprises Ltd has tied up with Bain Capital Credit to jointly invest in stressed assets in India. Similarly, Canada's Brookfield Asset Management Inc. formed a JV with State Bank of India. US private equity firm JC Flowers & Co. floated a JV with investment bank Ambit Holdings Pvt Ltd.
Kotak Mahindra Bank and Canada Pension Plan Investment Board had also formed a JV. But they called off the venture earlier this year.
However, such JVs have managed to strike only a handful of deals for stressed assets, prompting some of them to think of different strategies.
