Acquire distressed asset buyer IARC
BLACKSTONE WILL INITIALLY INVEST ABOUT $150 MILLION FOR A LARGE MINORITY STAKE, WHICH CAN BE SUBSEQUENTLY RAISED TO A MAJORITY IN A COUPLE OF YEARS
MUMBAI: Blackstone Group LP, the world’s largest alternative asset manager, is set to acquire a controlling stake in Mumbaibased distressed asset buyer International Asset Reconstruction Co. (IARC), according to two people aware of the development.
According to the deal, Blackstone will initially invest about $150 million for a large minority stake, which can be subsequently raised to a majority in a couple of years, said one of the two people, requesting anonymity.
Blackstone is the latest among global private equity funds to tap the opportunity in the distressed asset space.
Bad and stressed loans at Indian banks have surged to at least ₹10 lakh crore as on March 31 as the Reserve Bank of India hastened a clean-up of balance sheets of lenders, forcing them to sell-off bad loans to free up capital for lending.
Blackstone’s purchase will be executed through the Singapore arm of the firm’s Tactical Opportunities division, said the second person, who also declined to be identified. It will be spearheaded by Kishore Moorjani, senior MD at the Tactical Opportunities unit, the person added.
IARC was set up in 2002 by Arun Duggal, a former managing director and chief executive officer of Bank of America in India, along with former State Bank of India chairman 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 assets around ₹1,500 crore under management.
A spokesperson for Blackstone declined to comment. Calls, text messages and mails sent to Arun Duggal, chairman of IARC, did not elicit any response while mails sent to spokespersons for HDFC Bank, ICICI Bank, Tata Capital, FMO Netherlands went unanswered.
Another US-based PE fund KKR & Co was in advanced discussions to buy a controlling stake in IARC in 2016 but the talks were abandoned after KKR decided to set up its own asset reconstruction company in India. Mint had reported Blackstone’s plans to enter the distressed assets space in India in July.
“Blackstone’s investment in IARC will be on similar lines to that of the CDPQ-Edelweiss deal,” 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 to invest approximately ₹5,000 crore in stressed assets and specialised corporate credit in India over the next four years and to acquire a 20% stake in Edelweiss Asset Reconstruction Co.
AION Capital Management Ltd, a joint venture between ICICI Bank Ltd and Apollo Global Management, applied for a licence to form an ARC. US-based stressed asset specialist Lone Star Funds has also applied to the RBI to set up an ARC in India.