Companies & Sectors
Piramal Enterprises and Bain Capital Credit to pursue distressed debt investing in India
Piramal Enterprises and Bain Capital Credit have signed a Memorandum of Understanding (MOU) to create a strategic partnership to invest in restructuring situations in India, according to a release from Piramal. Once finalised, the platform will invest capital directly into businesses and acquire debt of such businesses to drive sensible restructurings. The sponsors believe that there is over an USD 1 billion investing opportunity in this space over the next few years.
 
The platform’s mandate would be to look at all sectors other than real estate as an asset class. Within these, the platform’s preference will be to invest in businesses that require restructuring and have fundamentally strong growth prospects linked to India’s infrastructure and consumption needs.
 
Both Piramal and Bain Capital Credit have significant experience and a long track record in investing.  Piramal has over three decades of experience of spotting early trends in investment opportunities, acting decisively and successfully creating value for all concerned shareholders. Bain Capital Credit has invested in this asset class for 15 years in North America, Europe, Asia and Australia.
 
Shantanu Nalavadi, an experienced investing professional with 25 years of experience in India and currently Managing Partner of Piramal Capital, will lead this strategic partnership.
 

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Economy in motion, but private corporate investment recovery still missing
While the Indian economy is in motion, growth not accelerating as expected with private corporate investment recovery turning out to be the missing link, says a report.
 
In a report, India Ratings and Research (Ind-Ra) says, "The key factor that is holding the acceleration of industrial growth is investment recovery. Besides stepping up its own capital expenditure, the incumbent government has taken several initiatives to revive private investment as also the manufacturing sector growth in the country. However, all this has failed so far to rekindle the animal spirit in the economy. In fact, the Business Confidence Index of National Council of Applied Economic Research (NCAER), which had reached 148.4 in January 2015, slipped to 121.6 in April 2016. Corporates, particularly those engaged in infrastructure, power, iron and steel and textile sectors, are either repairing their balance sheets or saddled with stagnation or even decline in capacity utilisation. We, therefore, expect investments to grow 5.0% in FY17, mainly driven by the government capital expenditure."
 
 
Although the government has tried to do its bit to revive the investment cycle as can be seen from the FY16 and FY17 budgets, unfortunately the share of state and central government capital expenditure in the total capital expenditure in the economy is only 16%. As the balance 84% comes from the private corporate sector, which includes central and state public sector undertakings, Ind-Ra says it believes government capital expenditure can play only a limited role in reviving the capex cycle. 
 
In the absence of investment demand, Ind-Ra says, the key support to industrial growth is coming from the consumption demand. Moderation in both inflation and lending rates of banks is aiding the consumption demand in urban areas. Salary revision of central government employees due to the award of the recommendations of the Seventh Central Pay Commission will further aid the urban consumption demand. Also, with favourable monsoon so far, Ind-Ra says it expects even rural demand to recover in FY17. However, it will still not be sufficient to drive the industrial growth higher than the 7.4% witnessed in FY16.
 
 
The ratings agency says it also feels that the situation is more complex than hitherto believed. As in the aftermath of debt-fuelled expansion both banks and corporates are repairing their balance sheets, it has led to a virtuous cycle whereby banks are not lending and private corporate sector is not investing. The impaired asset ratio of the banking system is expected to inch up to 12.5%, including assets reconstruction companies’ receipts but excluding Discom bonds, by FY17.
 
"The median debt-to-equity ratio for infrastructure, iron and steel and textiles sectors increased to four to six times in FY15 from under two times in FY10. Ind-Ra says its estimates suggest that 240 of the top 500 borrowers belong to the stressed and elevated risk of refinancing categories and will remain exposed to significant refinancing risk during FY17. Clearly, there is no easy way out as the process of balance sheet repairing or cleaning will take time, it added.
 
 
The ratings agency also revised also revised its gross domestic product (GDP) estimate for FY17 upwards to 7.8% (FY16: 7.6%) from its earlier forecast of 7.7%. It said, "The upward revision has been prompted by the progress of monsoon and the sowing of kharif crop so far. With the exception of East and Northeast, the rainfall in other regions of the country has been more than long period average (LPA). Cultivated area under kharif crops on 19 August 2016 was 5.7% higher than the normal area (average of latest available five fiscal years). As a result, we now expect the agricultural gross value added (GVA) to grow 3.0% yoy in FY17 compared to the 2.8% forecasted earlier."
 

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Anil Ambani's son Anmol joins Reliance Capital board
The Board of Directors of Reliance Capital on Tuesday approved the induction of Anmol Ambani, the 24-year-old eldest son of Reliance Group Chairman, Anil Dhirubhai Ambani, on the Board of Reliance Capital as an Additional Director.
 
The induction follows the recommendation by the Nomination and Compensation Committee of the Board of Reliance Capital, comprising largely of Independent Directors, a company statement said. 
 
"The last two years have given me great learnings about the financial services business. I look forward to using this experience for scaling up our businesses and contributing towards their growth and progress," said Anmol Ambani.
 
An alumnus of Warwick Business School, Britain, he has been working in various financial services businesses within Reliance Capital since 2014.
 
He has also been a part of the interactions with Nippon Life for increasing stake in Reliance Life Insurance and Reliance Capital Asset Management in the last two years.
 
"Anmol's presence in any event evokes a lot of engagement and response. He likes to spend a lot of time interacting with local teams informally," said Sam Ghosh, Executive Director and Group CEO of Reliance Capital. 
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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