Edelweiss Alternate Asset Advisors (EAAA), an arm of Edelweiss Capital is looking at launching a $200-million distressed asset fund under Sibi Antony (Ex-IDBI). I’ve met Sibi often at IDBI (Merchant Banking Division) during my earlier stint in corporate service and have found him to be an extremely capable manager. He has been instrumental in recovering a large portion of IDBI NPAs and in managing their SASF (Stresses Assets Stabilization Fund) ; hence must have a ready database of owners of stressed assets as well. I am sure he has several aces up his sleeves to turn them around (or to hive them off).
In the coming weeks, I will be closely watching him take on some of the biggest hurdles in ARC business I’ve outlined viz. –
a) Banks' reluctance to minimum 20% haircuts while transferring stressed assets to ARC;
b) Non rationalization of stamp duty incidence while transferring dud assets;
c) Govt. stand on triggering of takeover code when debt is swapped into equity in terminally ill companies;
Still the distressed asset market size is about $35 billion and the nine odd ARCs in India have of late been a bit passive since the stock market and realty markets are going thro a lull phase. May be if the conditions (high crude price, rise in Bank NPAs, inflation and liquidity squeeze) persist, Sibi will be looking at a much larger market size where his stated strategy of focusing on corporate / SME assets with accent on single assets than portfolios should payoff. But then much depends on bringing around lenders to accept ARC terms and getting the borrowers to accept the strategic and financial bitter pill offered by undertakers like Sibi. Sibi will have a great support from Rashesh Shah and his team of I-Bankers in finding premium buyers to these stressed assets anyway - and much less bureaucracy to deal with unlike with his previous employer IDBI.
In the coming weeks, I will be closely watching him take on some of the biggest hurdles in ARC business I’ve outlined viz. –
a) Banks' reluctance to minimum 20% haircuts while transferring stressed assets to ARC;
b) Non rationalization of stamp duty incidence while transferring dud assets;
c) Govt. stand on triggering of takeover code when debt is swapped into equity in terminally ill companies;
Still the distressed asset market size is about $35 billion and the nine odd ARCs in India have of late been a bit passive since the stock market and realty markets are going thro a lull phase. May be if the conditions (high crude price, rise in Bank NPAs, inflation and liquidity squeeze) persist, Sibi will be looking at a much larger market size where his stated strategy of focusing on corporate / SME assets with accent on single assets than portfolios should payoff. But then much depends on bringing around lenders to accept ARC terms and getting the borrowers to accept the strategic and financial bitter pill offered by undertakers like Sibi. Sibi will have a great support from Rashesh Shah and his team of I-Bankers in finding premium buyers to these stressed assets anyway - and much less bureaucracy to deal with unlike with his previous employer IDBI.
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"Good luck, Sibi... " [Now some sales pitch.] "Call me if you have some [not so] bad apples to get rid of, fast "
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