TPG excited about India’s distressed market

The Indian government wants to clean up $130 billion in distressed assets by relaxing foreign direct investment rules.

TPG is eyeing on India’s distressed assets. Jim Coulter, the firm’s co-founder and co-chief executive, brought 65 of his investors to the nation to meet policy makers and companies this week, according to Bloomberg.

TPG may write “billion-dollar checks” in India, Coulter told Bloomberg. The private equity firm has been on the sidelines for a long time, waiting for opportunities to invest in non-performing assets in the country, according to TPG Capital’s India head, Puneet Bhatia. 

“Our single focus is in India right now,” Coulter said to Bloomberg. “We have the dry powder, the inclination and we have the aspiration that this would be the core market for us as this economy grows.” 

International players are excited to acquire bargain assets by seizing the existing credit opportunities in India, which sits on a $131 billion of problem loans. This urged the government to clean up its distressed assets. 

Problem loans accounted for 14.1 percent of total loans, as of 30 September, according to the Reserve Bank of India (RIB). This has been the highest proportion over the past 15 years. Credit Suisse Group AG expects another four percent when an audit driven by the central bank finishes 31 March. 

“Vulnerabilities in corporate financial positions and public bank asset quality pose risks to the economic recovery and to financial stability if left unaddressed,” said Jose Vinal, IMF’s financial counselor, during a talk at the RIB. 

Therefore, in the budget speech last month, India decided to open up commodity broking, infrastructure debt fund and proprietary trading for 100 percent foreign direct investment (FDI) under automatic route.  

Firstly, 100 percent FDI in asset reconstruction companies (ARCs) will be permitted through automatic route and allow foreign portfolio investors up to 100 percent of each tranche in securities receipts issued by ARCs subject to sectorial caps. In addition, FDI will be expanded from 18 to 25 specified non-banking financial company (NBFC) activities through the automatic route.  

“It now strikes as the time when the ducks are lined,” Bhatia told Bloomberg.  “Distressed opportunities in India are more suited for private equity, as you have to own the entire capital structure and need to make the management changes.”

TPG’s investors visiting India this week manage more than $3 trillion of capital, according to Coulter. He told Bloomberg that this was the first time the private equity firm brought its investors to the nation. TPG had invested $1.5 billion in India so far, he added. 

TPG’s India transactions have so far only gone in via its private equity business, not its debt platform, PDI understands.