Analysis of distressed assets investing in India

Abstract

The Indian economy has been amidst a slowdown for a while now. Growth in credit has seen a deceleration. Financial institutions brace themselves for fresh non-performing assets and declining investment rates (Upadhyaya, 2020). With the advent of COVID, the situation has gone from bad to worse. In such a situation, investments in the distressed assets space are likely to become more important than ever. The market for stressed assets stands at ~USD 150 Billion and has substantial potential for investment. (Alvarez & Marsal, 2019) Through this report, we make an attempt to understand the nuances of the distressed assets space in India. The report is divided into five broad sections. Section I elaborates more on the distressed assets investment space in India right from its underlying principles, recent and anticipated future trends, as well as the indicative factors responsible for thedistress situation. Section II discusses the Insolvency and Bankruptcy Code, 2016. In this section, we bring out the backdrop of its introduction, the progress it has made so far, and the issues that it has faced through its life so far. In Section III, we have analyzed three case studies to understand the journey of a company from distress to resolution. We have looked at cases resolved through the Insolvency and Bankruptcy Code, as well as prior to its introduction. Further, we analyze the impact that the type of investor may have on distressed investments. In Section IV, we have applied the learnings from Section III on a few on-going cases to gauge the direction that these cases may pursue in the future. Lastly, in section V, we look at alternate resolution mechanisms such as Asset Reconstruction Companies, Bad Banks, and the RBI circular dated June 7, 2019.