InvestorQ : Is it true that Varde Partners is planning to buy distressed assets in India in a big way?
Anjana Aiyar made post

Is it true that Varde Partners is planning to buy distressed assets in India in a big way?

Khushi Patel answered.
3 weeks ago

In fact, Varde Partners is already quite active in India and it remains one of their biggest markets in Asia for distressed assets. What Varde is now doing is to expand its allocation to the Indian market. Incidentally, Varde is a US based alternative investment firm and happens to be one of the leading distressed fund investors in the world. In its latest initiative, Varde Partners plans to invest $1 billion or more to grow its portfolio in India. Varde sees a huge potential in India, especially in the field of special situations investing and also in the areas of investing in distressed debt of banks.

To be fair, Varde is already active in India. They have a sizable India portfolio of around $3-4 billion and are only looking to enhance it a bit more aggressively. Varde is planning to split the $1 billion proposed investment across 6-8 different transactions so that they are able to commit reasonable value to these potential investments. Typically, Varde looks at an average ticket size of $100 million to $200 million per deal, so it would be more than 6-8 deals. Its approach to distressed investing is largely sector agnostic with no sectoral preferences, but focussed largely on distressed assets and special situations.

Varde sees a huge opportunity for taking over viable stressed assets in sectors like real estate, infrastructure and industrials. These sectors have seen the maximum stress of bank loans and have also been pushed to the verge of bankruptcy as they have struggled to service the debt. Stressed asset funds like Varde enter in to take over such stressed assets at fairly deep discounts. Banks have a sweetener in this deal in that the lenders also get a shar of additional collections that the stressed fund may make from the deal. Hence, banks are in a better position to create substantial value and realize more on their outstanding loans.

In India, Varde has successfully deployed over $3 billion across 20 different transactions in the last 4 years. The investment of $1 billion this year is in addition to these investments in stressed assets already made by Varde. A couple of deals were in the ADAG group space. For instance, Varde has acquired 15% stake In Reliance Power Ltd for Rs933 crore. Last year, Varde had infused Rs550 crore into Reliance Infrastructure Ltd. Currently, 40% of Varde Partners’ allocation to Asia is in India. That shows the potential. In special situations and credit Varde may have still just about scratched the surface.