SBI plans $2 billion distressed asset fund

State Bank of India (SBI) is examining the possibility of floating a distressed asset fund in 2020, Business Standard reported. The size of the distressed asset fund may be as much as $2 billion, SBI Chairman Rajnish Kumar told the publication. It will likely be formed along the lines of the government’s alternative investment fund (AIF).

“We are expanding our fund management business. At present, SBICAP Ventures -- the fund management arm of the group -- is managing a realty fund. It is looking at a distressed asset fund too,” he said.

SBICAP Ventures is looking to raise money from an international partner, Kumar told the paper. “SBICAP Ventures can float such a fund (for stressed assets) only when it has commitment from a strong international partner. Negotiations are going on. The realty fund has given us a lot of confidence,” he said.

SBI and Life Insurance Corporation (LIC) have contributed 10 percent each to the AIF out of the Rs 10,530 crore. The fund was launched in November 2019.

SBI Chairman also highlighted some reasons why foreign investors are eyeing India’s stressed assets market, which include supply of stressed assets, regulatory transparency and robustness, and potential for greater returns than similar assets globally.

Kumar also spoke about the Insolvency and Bankruptcy Code (IBC). “IBC is a big success story with the Supreme Court clearing all issues. Ruchi Soya and RattanIndia Power have been resolved in December quarter. The process of resolving cases like Reliance Communications and Alok Industries is underway and likely to be resolved in the March-June quarter,” Kumar stated.