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Private Equity inflow: Solution to rising NPAs

Amit Kumar Agrawal

PGP Student, 1st year, IIM Calcutta


Number of PE Funds participating in India

 

Banking system is reeling under ₹12-lakh crore worth of stressed assets (gross NPAs plus restructured advances) – 11.5% of gross advances. Global PE investors are partnering with local players to invest in the distressed assets space in India.

ARCs act as debt aggregators by acquiring non-performing loans from the banking system, managing and recovering illiquid NPLs by putting them on the resolution path. Regulatory changes made as part of Insolvency and Bankruptcy code have created an enabling and supportive operational environment for ARCs and for takeover of stressed assets by PE firms.

Apollo Global ($825Mn), Canada Pension Plan ($450Mn), Brookfield Asset Management ($1Bn), Bain Capital ($1Bn), Lone Star Funds ($550Mn), SSG Capital ($2Bn), Pacific Alliance and Oaktree Capital have already made commitments to investing in the Indian distressed debt opportunity.

With the market for distressed asset in India set to grow, will entry of Private Equity firms in this sector solve this problem? Only time will tell.