APAC: CDPQ increases allocation to Indian stressed assets

12 June 2018 - 12:00 am UTC

Canadian pension fund manager Caisse de dépôt et placement du Québec (CDPQ) has made an additional USD 600m available to Edelweiss Group to invest in Indian distressed assets.

The funds are for co-investment in stressed assets alongside its local partner, Edelweiss, according to the managing director of the distressed asset resolution business at Edelweiss Asset Reconstruction Co (ARC), R.K. Bansal.

A spokesperson for the Montreal-based fund declined to comment.

CDPQ acquired a 20% equity stake in Edelweiss ARC for USD 750m in October 2016.

Edelweiss ARC – India’s largest buyer of bad debt – is scouring the power, port, steel, paper and textile sectors for investment opportunities.

Interest in Indian bad debt has risen among foreign institutional investors alongside an rise in opportunities to acquire distressed assets. These have risen as debtors have increasingly sought the enforce their claims under the country’s Insolvency and Bankruptcy Code, introduced in 2016.

Meanwhile, CDPQ-backed Resurgent Power Ventures – which was established in September 2016 to acquire controlling stakes in Indian power projects – has yet to disclose any deals. 

BAML’s analysts estimate that about USD 53bn of USD 178bn loans to the power sector are stressed.

India currently has about 45GW of thermal projects which are stranded due to a lack a fuel supply or power purchase agreement, or both.

At the same time, bad loans are crimping the ability of India’s banks to lend to big infrastructure projects. Most of the loans are a legacy of a borrowing binge by corporates in the wake of the global financial crisis and subsequent economic slowdown.

Gross non-performing assets of Indian lenders rose to INR 10.3trn (USD 152.5bn) as at end March according to official data. This compared to INR 8trn a year earlier, due to higher provisioning rules adopted by the Reserve Bank of India. 

Edelweiss ARC’s sister company – Edelweiss Alternative Asset Advisors – said on Tuesday (12 June) that it plans to raise INR 20bn for a new stressed/distressed assets strategy, EISAF II Onshore Fund. 

This strategy will focus on acquiring  non-performing debt from financial institutions, funding companies for debt settlements, working capital financing and acquisition of stressed companies’ debt and equity under insolvency proceedings under the National Company Law Tribunal.