$210B of Indian bad debt lures offshore funds

mumbai — India’s two-year-old bankruptcy law, which gives creditors more power to restructure troubled companies, is luring more and more offshore investors from as far as Canada to buy the nation’s bad debt.

Caisse de dépôt et placement du Québec (CDPQ), a Canadian pension fund manager, has made $600 million available to Edelweiss Group for investment in local distressed assets, according to R.K. Bansal, an adviser for Edelweiss Asset Reconstruction Co.

Hong Kong-based SSG Capital Management Ltd sees more opportunities in such assets, and foreign funds including Oaktree Capital Group LLC and Varde Partners are also keen to participate in the fledgling market.

India’s banking sector is coping with about $210 billion of soured or problem loans, a legacy of a borrowing spree following the global financial crisis and an economic slowdown after that.

The Insolvency and Bankruptcy Code introduced in 2016 has given rise to opportunities for funds to acquire borrowers’ distressed assets.

High potential profits on those deals attract funds: SC Lowy Financial HK Ltd. expects annualised returns of about 15 per cent, according to chief investment officer Soo Cheon Lee.

“The change now is that there is more bad debt available to buy as many more names are in restructuring,” said Pallavi Gopinath Aney, a principal in the finance and projects team at Baker McKenzie Wong & Leow in Singapore.