Mumbai: Blackstone Group Lp, the largest alternative asset manager in the world, is poised to acquire a controlling stake in the distressed asset buyer in Mumbai, International Asset Reconstruction Co. Pvt. Ltd (IARC), according to two people aware of development.
Under the agreement, Blackstone will initially invest about $ 150 million in a large minority stake, which can be raised to a majority in a couple of years, one of the two people said, seeking anonymity.
"Indian ARCs are attracting a serious global interest because lenders have begun to take a realistic view of the underlying value of bad loan assets," said Mahesh Singhi, founder and managing director of Singhi Advisors Pvt. Ltd. "Lenders also expect a down payment of 50% in cash, up from the previous 15% on such loan acquisitions, requiring large capital commitments and deep pockets. "
The Blackstone purchase will be run through the Singapore arm of the company's Tactical Opportunities division, said the second person previously quoted, who also declined to be identified. It will be headed by Kishore Moorjani, general director of the Tactical Opportunities unit, added the person.
IARC was created in 2002 by Arun Duggal, former managing director and chief executive officer of Bank of America in India, along with former chairman of Indian State Bank M.S. Verma. IARC is backed by HDFC Bank Ltd, Tata Capital Financial Services Ltd, ICICI Bank Ltd, City Union Bank Ltd, FMO Netherlands and Standard Bank Plc., UK, as institutional shareholders and has around of Rs.500 million under management.
A Blackstone spokesman declined to comment. Calls, text messages and e-mails sent to IARC President Duggal did not receive any response, while emails sent to HDFC Bank, ICICI Bank, Tata Capital and FMO Netherlands spokespersons were not answered.
KKR & Co., based in the United States, was in an advanced discussion to acquire a controlling stake in the IARC in 2016, but the talks were abandoned after KKR decided to establish its own asset reconstruction business (ARC) in India. Mint had reported on Blackstone's plans to enter the troubled assets space in India in July.
"Blackstone's investment in IARC will be similar to that of the CDPQ-Edelweiss agreement," said the second person. Last year, Caisse de Dépôt et Placement du Québec (CDPQ), Canada's second largest pension fund, signed a long-term partnership with Edelweiss Financial Services Ltd to invest approximately Rs5,000 crore in outstanding assets and specialized corporate credit in India over the next four years and acquire a 20% stake in Edelweiss Asset Reconstruction Co.
AION Capital Management Ltd, a joint venture between ICICI Bank and Apollo Global Management, applied for a license to form an ARC, Mint reported in January. US specialist specialist Lone Star Funds has also asked RBI to create an ARC in India, according to a November 2016 report.
KKR & Co. has been granted a license to start an ARC in India and SSG Capital Management of Hong Kong and International Finance Corp. (IFC), the investment arm of the World Bank, have acquired holdings in existing ARCs. In January 2015, IFC invested in Encore Asset Reconstruction Co. Pvt. Ltd, while SSG had acquired a 49% stake in Asset Care & Reconstruction Enterprise in 2014.
New entrants to the troubled asset business in India include Ambit Flores Asset Recovery Pvt. Ltd, a joint venture between global asset specialist JC Flores and Ambit Holdings Pvt Limited; Suraksha ARC, sponsored by Sudhir Valia, executive director of Sun Pharmaceutical Industries Ltd; and Raytheon Asset Reconstruction Pvt. Ltd, sponsored by Anil Bhandari.
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