Global alternative investment giant Apollo Global Management is setting its sights on the Indian market by targeting growth and distressed opportunities, according to a private debt panel hosted by the Hong Kong Venture Capital and Private Equity Association (HKVCA).
“The use of debt in the mix creates the ability to ensure you get a return, ensure you have the cover and other things that you might not be able to get as a minority stakeholder,” said Mintoo Bhandari, senior partner at Apollo Global Management.
“This is a very intelligent way to play a market like India. You can get better alignment, better control and more reliable return by leveraging a debt to equity approach [rather] than pure equity or pure debt alone.”
In India, 70 percent of the loan market is dominated by the state-owned banks. However, they are now under tremendous liquidity constraints as a result of having huge stacks of NPLs. As a result, sometimes even the most optimal borrowers in India fail to get loans at an attractive price, leaving a void to be filled by non-bank lenders.
“So we acquired GE Capital in India to essentially attack that space, we saw that bridge and that’s a big opportunity,” said Bhandari. Last year, Apollo acquired the commercial lending and leasing business of GE Capital in India via its India affiliate AION Capital Partners.
“We actively seek out distressed situations where we can come into control of the situation through the debt, and it is typically state-owned banks that we are looking to acquire these companies from,” said Bhandari.
Apart from AION Capital, a special situations joint venture launched with ICICI Bank in 2014, Apollo also entered into a $1 billion partnership with International Financial Corporation (IFC) to acquire distressed assets in emerging markets early last year.
Commenting on the new bankruptcy code in India, Bhandari thinks the code is still at an early stage of being tested and may take longer than some expect for it to be fully implemented. But he added that “it has a potential to be a true game changer”.