Current State of Indian Distressed Market and Related Investment Opportunities

On July 28, USISPF hosted a virtual roundtable on the current state of the Indian distressed market and related investment opportunities. Featured speakers included Ambassador Frank Wisner, International Affairs Advisor at Squire Patton Boggs; Sunil Mehta, former chairman of Punjab National Bank and currently, the non-executive chairman of Yes Bank; and Cyril Shroff, Managing Partner of Cyril Amarchand Mangaldas, as well as L Viswanathan and Dhananjay Kumar from Cyril Amarchand Mangaldas. Stephen Lerner, Global Chair of the Restructuring and Insolvency Practice Group at Squire Patton Boggs, moderated a panel discussion in which the speakers shared their insight on alternative mechanisms for insolvency and bankruptcy resolution, and opportunities these present for U.S. investors in India.

In his opening statements, Ambassador Wisner characterized distressed assets as “storehouses of great value and platforms for future growth,” and said that opportunities to restructure and refinance distressed assets in India could be a “fruitful endeavor” for U.S.-India cooperation.

Sunil Mehta discussed the improvements to India’s insolvency and bankruptcy policies since the creation of the Insolvency and Bankruptcy Code, 2016 (IBC) as well as some challenges that remain, particularly in light of the COVID-19 pandemic. He highlighted pre-packaged solutions, one-time restructuring, and asset reconstruction companies as potential resolution platforms that are being considered as alternatives to the IBC. Finally, he discussed the success of the bank-led resolution structure in the case of Yes Bank, which has been able to raise $2 million in capital through its public offering earlier this month.

Cyril Shroff also discussed the importance of the IBC, saying that the stressed assets environment has changed significantly as a result of having a rules-based system for resolution according to global best practices, and that its success has been supported by proactive legislative and executive action, as well as landmark judgements by the Supreme Court of India. While noting that the government’s decision to suspend the IBC in March was an appropriate policy response at that stage, he warned that the suspension may be abused by companies whose financial difficulties are not due to COVID- 19. Looking to the future, he predicts flexibility and open-mindedness on legislative reforms, new vehicles for private capital, meaningful action on pre-packaged regime, notification of a model code for cross-border insolvency, and a financial sector resolution code.