MUMBAI: Canadian pension fund manager Caisse de dépôt et placement du Québec (CDPQ) and home-grown financial services firm EdelweissBSE -1.34 % plan to invest as much as $1.8-2 billion into private debt and restructuring of stressed assets in the country over the next four years, joining the league of bulge bracket fund managers to tap opportunities to lend to cash-strapped Indian corporations.
CDPQ announced earlier on Monday that it acquired 20 per cent stake in Edelweiss Asset Reconstruction Company with an initial investment of $300 million, with an option to increase up to $700 million in the next four years to buy bad loans from banks, said Michael Sabia, president and CEO, CDPQ Edelweiss shares surged 8.52 per cent to close at Rs 122.9. During the day, shares in the company spiked as much as 11.3 percent to touch a 52-week high.
ET reported in its edition dated October 3 that CDPQ has agreed to invest $250 million in Edelweiss ARC. The platform will invest in assets with the aim of restructuring debt and turning around companies, as well as becoming the provider of financing to Indian entrepreneurs and companies.
These investments, to be carried out by Edelweiss ARC and through different Edelweiss funds, will result in the purchase of non-performing loans from Indian banks and investments in private debt of growing Indian companies.
CDPQ has already invested between $1.3 billion to $1.5 billion in listed Indian companies in sectors like energy, real estate, and logistics. As per the industry estimates, CDPQ is also one of the key sponsors of the India-focussed private equity funds such as ICICI Venture and IDFC Alternatives. “This partnership gives us access to capital. We will look to merge our skills with their capital and also provide value added services with the help of CDPQ executives who have specialised capabilities, ” said Rashesh Shah, chairman, Edelweiss Group.
With Rs 30,000 crore of assets under management, Edelweiss ARC is the largest in India. Shah expects banks to offload up to Rs 40,000 crore of bad assets in the next four years of which his company will likely corner 25-30 per cent.
With this stake sale, CDPQ will become the largest foreign investor in Edelweiss ARC. Edelweiss group owns 60 percent of the company, while other investors own 16 per cent. Swedish insurance company Gamla Livforsakrings AB SEB Trygg Liv also owns 4 per cent in the company.
Global investors are lining up to invest in distressed or troubled assets in India as Reserve Bank of India is going strictly on the troubled assets portfolio of Indian banks. US private equity giant KKR & Co has agreed to buy a stake in International Asset Reconstruction Company, while Canada Pension Plan Investment Board and Kotak Mahindra Capital have already launched a $545-million distressed fund.
Another US private equity firm, Apollo Global Management already tied up with ICICI Venture and launched a $850-million distressed fund.
Recent Articles on M&A
Source: Economic Times
