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Varde Partners Inc and Aditya Birla Capital are planning to form a 50:50 joint venture to invest about $1 billion in distressed assets in India, according to a report by Mint.
The US-based investment firm, which manages $14 billion of assets, and the Kumar Mangalam Birla-promoted financial services provider are expected to deploy the sum over three years, sources told the paper.
The joint venture, which is going to hunt for deals of up to $100 million, will be officially announced soon.
"We will initially capitalize the ARC with the stipulated Rs 100 crore and then we will continue to deploy capital," Ajay Srinivasan, Chief Executive Officer at Aditya Birla Capital, was quoted as saying.
"There is no minimum commitment per se as far as the total investment in India is concerned and we will keep evaluating opportunities as they come," Srinivasan told the news daily.
Varde now joins overseas investors such as Blackstone Group LP and Oaktree Capital Group LLC in the government's efforts to resolve $210 billion in bad loans.
The move comes in the wake of the Reserve Bank of India forcing over 40 large defaulters into bankruptcy courts.
RBI had, earlier this year, set August 27 as the deadline for these stressed companies to be restructured. It had said that if any of them failed to meet the deadline, they would be taken to court.
"With the first set of 12 cases already in the National Company Law Tribunal ( NCLT) our focus will be on smaller assets where Aditya Birla group with the vast operational expertise on several sectors can come and engineer the turnaround," Srinivasan was quoted as saying.
In a September 2017 interview to the paper, Ilfryn Carstairs, Co-Chief Investment Officer at Varde, had referred to the opportunity in India's distressed assets as "enormous" and one of the biggest in the world.
Comparing the bad loans problem of India to that of Italy and Spain, Carstairs had claimed that he sees "systemic" opportunities in India.
Aditya Birla Capital already has an asset reconstruction business that focuses on bad loans given to micro, small and medium-sized companies.
The joint venture will also set up an alternative investment fund to buy financially stressed firms that are on the brink but haven't defaulted yet, Srinivasan told the newspaper.
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