Everstone joins stressed asset play

by / Wednesday, 20 April 2016 / Published in News & Updates

The largest India-focused private equity investor Everstone Capital plans to step into an asset class where many fear to tread: stressed businesses. Everstone’s foray will be spearheaded by its new managing director Avnish Mehra, former country head of US buyout fund Advent International. Everstone, managing assets worth more than $3.3 billion, joins global giant KKR among the few foreign investors to start work on acquiring and turning around stressed companies in India.

Private equity hasn’t done much work with Indian companies sitting on perilous debt. The acquisition of the debt-laden Vishal Retail by TPG remains one of the early instances of global risk investors owning a troubled Indian company. Canadian investor Brookfield Asset Management’s buyout of six road and three power projects from Gammon was a recent case of a foreign investor dabbling in India’s distressed market. KKR, which is eyeing a buyout of fundamentally strong businesses with impaired capital structures, was in the reckoning to acquire Jaypee’s cement business, which eventually went to the Birla-owned UltraTech.

“Special situations investing, an industry parlance for acquiring stressed assets, is a complex work and it requires understanding of debt and equity. Mehra brings that experience which will enhance our ability to explore distress deals,” said Sameer Sain, co-founder and managing partner, Everstone Group. Like other private equity investors, Sain, a former Goldman Sachs banker, appeared cautious, adding that he did not want to put too much emphasis on the planned special situations vertical right now. Mehra is also a veteran with global experience in investing across healthcare, media and telecom sectors, he added.

The RBI has been pushing state-owned banks to reduce exposure to stressed or restructured debts, which account for 14% of the overall loan book. Billionaire Ajay Piramal recently announced entry into distressed investments even as several other industrialists through their family offices have started prospecting troubled assets being axed by banks. The country’s cumbersome rules put domestic investors in a better position to take on stressed assets, despite the RBI enacting strategic debt restructuring (SDR) guidelines paving the way for banks to bring in a new owner.

“Everstone has an experienced operational team which is essential in distress deals. But we will wait for the new bankruptcy law to figure out the velocity of such transactions,” Mehra said. The special situations vertical would weigh all options, including raising a separate fund, if opportunities played out well. Everstone was sitting on more than $1 billion of firepower after a recent fund-raise, Mehra added. He was involved with Advent’s buyout of Crompton Greaves’ consumer business, which the Gautam Thapar family put on the block to pay off debts, and its investments in CIBIL and Care Hospitals, among others.

Singapore-based Everstone of late has stepped on the gas on acquisitions with the deals to buy Modern Foods from Hindustan Unilever and a majority stake in Aon Hewitt’s payroll processing in Asia being the recent ones.

“Several Indian family offices are in the market studying stressed assets sold by banks. This is an avenue for some of these business families to diversify into newer areas besides being financial investments. Many of them come with strong management expertise and the ability to manoeuver local business complexities,” said Mahesh Singhi, founder of Singhi Advisors, a Mumbai-based boutique investment bank focused on M&As.

Sun Pharma founder Dilip Shanghvi’s family’s 23% stake in the stressed wind turbine maker Suzlon was among last year’s high-profile transactions. But most such deals till now have involved small cap companies, the sales of which have been set in motion by lenders. The acquisition of Shree Rama Newsprint by the Riddhi Siddhi business family and Gammon T&D by Bilav Software, an entity linked to Ipca founder, figure in this list.
See Article: http://timesofindia.indiatimes.com/business/india-business/Everstone-joins-stressed-asset-play/articleshow/51299508.cms