New Delhi: Dr Krishnamurthy Subramanian, Chief Economic Adviser, Govt of India today said, “IBC is an evolving process and there is scope for making it far more efficient. It is definitely an important step in the right direction.”
Addressing a virtual session ‘Investment Opportunities In Stressed Assets In India’, organized by FICCI, Dr Subramanian said, “Given the stress that had built up in the financial sector before we entered the crisis, we will now have to take care of some stress that will inevitably happen because of COVID-19. The eco-system of creative destruction is a very important part of any economy.”
In order to make the distressed assets market to flourish in the Indian context, Dr Subramanian said that we need to focus on incentives for banks, especially public sector banks, along with establishing a market for price discovery of stressed assets.
He further highlighted that when a company goes into distress, judgment is involved in order to avoid the under-investment problem. “With the involvement of judgement, there is always a possibility of hindsight bias which can create enormous risk aversion. Judgement and investigation that does not take into account some of these nuances can make it difficult for the bankers to do what is economically efficient,” Dr Subramanian noted.
Emphasizing the importance of establishing a market for price discovery of stressed assets, he said that without this, the process of taking the haircut itself becomes difficult. “This is where distressed funds play an important role. Also, the corporate bond market that enables the distressed companies, for the loans and bonds to be traded also becomes important.” Highlighting the US case of having a market for price discovery, he said that there are some important market failures which we have in the creative destruction process which we need to focus, added Dr Subramanian.
Mr Sudhaker Shukla, Whole Time Member, Insolvency and Bankruptcy Board of India (IBBI) said that emphasized that the economic analysis from emerging data shows that India can have V-shaped recovery. “One should be assured that we are at the right path of the recovery. There would be certain sectors which would be still under stress, hence there is a need for sectoral analysis to be done of those sectors,” he added.
Mr Shukla also informed that IBBI is developing a platform for stressed assets and eventually will have auction platform as well through which investors can easily find all information about the investment potential. “The virtual data room has been launched on 1st October and the auction facility will be available in another 6 months. I invite you (investors) to participate in the encouraging development story of India,” he added.
While highlighting the World Bank’s reports on Ease of Doing Business which mentions that the average time taken to resolve insolvency case in India has come down from 4.5-3 years to 1.6 years now. “All indicators suggest that India is the best performer in South Asia, and comparable in results emanating from the OECD countries,” Mr Shukla emphasized.
Highlighting on the IBC process, he said that pre-IBC, the regime was scattered but now IBC has brought regulatory certainty along with time-bound processes. “All loopholes have been plugged in so this is a responsive regime. This is the reform by stakeholders, of the stakeholders and for the stakeholders,” he added.
Mr Pavan Kapoor, Ambassador of India to UAE said that India and Abu Dhabi share a very strong bilateral relation complemented by high-level exchanges which happened in the last few years. “The establishment of a comprehensive strategic partnership has brought the countries closer resulting in deeper economic integration,” he added.
Mr Kapoor also said that with the recent policy reforms and the IBC, there is a lot of potential for UAE investors to invest in Indian stressed assets and reap the benefits.
Mr Rashesh Shah, Past President, FICCI and Chairman & CEO, Edelweiss Group said that in India, there is no problem of assets under stress but it is the promoters or company’s balance sheet which is stressed. “There is a lot of potential in the revival of these assets with good returns. These assets only need new capital structure,” he said.
Mr Shardul Shroff, Chairman, FICCI National Committee on Stressed Assets and Executive Chairman, Shardul Amarchand Mangaldas & Co, Advocates & Solicitors said that India has moved up dramatically in the Ease of Doing index in the world. “The opportunities in the Indian context are massive,” he added.
Mr Nikhil Shah, MD, Alvarez & Marsal India explained in detail the key ingredients for a successful investment strategy in stressed sector in India.
Mr Dilip Chenoy, Secretary General, FICCI also shared his perspective on the investment opportunities in stressed assets in India.