Tavasya’s special situations approach: unlocking value in distressed assets

Navneet Garg Tavasya Capital Managers

Tavasya SSF, a category I special situations fund, has achieved the initial close of its second scheme with a fund size of Rs 200 crore. Founded in 2023, Tavasya focuses on special situation investments in India’s distressed asset space.

In an interview to Moneycontrol, Navneet Garg, co-founder of Tavasya Capital Managers, shared insights into the fund’s strategy and key investment opportunities in the evolving distressed assets market. Edited excerpts:

What is the core investment philosophy of Tavasya?

As a special situations fund, Tavasya’s core investment philosophy remains consistent —identifying distressed assets, acquiring them at a discount, adding value, and monetising at a higher valuation to generate superior returns.

However, the deployment strategy differs. We have launched two funds to date. While our Scheme I focuses on acquiring distressed companies, Scheme II targets acquiring their debts and co-investing with asset reconstruction companies (ARCs), which provide multiple advantages, including faster recoveries through SARFAESI rights, extended resolution timelines, and reduced upfront acquisition costs. These benefits contribute to accelerated and improved returns while distributing risk between the AIF and ARC.

Did you face challenges in securing investor commitments?

Our deep understanding of the distressed asset space, our commitment to co-invest at a significantly higher ratio than the SEBI-mandated requirement, and our transparent approach in sharing our investment choices enabled us to secure strong investor commitments for Tavasya’s first two schemes within six months of each other.

Several factors contribute to this interest, including investors’ expectations of superior returns, our transparent structure, and investors’ desire to diversify into a new asset class.

Our first scheme had a global investor as its largest backer, whereas the second scheme was closed with domestic investors. We plan to engage more institutional and international investors for future fundraises.

Which sectors present the most distressed asset opportunities?

Distressed opportunities are not confined to specific sectors; they largely depend on company mismanagement or market circumstances leading to financial distress. Our key advantage lies in entry pricing — acquiring assets at a discount to intrinsic value. This provides a buffer against risks such as resolution delays, interest rate fluctuations, demand slowdowns, exchange rate volatility, and commodity price changes, ensuring strong portfolio returns.

Do you see potential for expanding your investment model to other emerging markets?

We are actively monitoring the adoption of insolvency frameworks similar to IBC in emerging markets and will consider expansion at the right time.

One of our founding partners has extensive experience in these regions. We have multiple schemes in the pipeline, including those focused on distressed debt investments backed by steady cash flows.