Investment opportunities as Indian banks look to clean up their balance sheets

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Recently India has been receiving a lot of attention in the global press, in particular about the new national bankruptcy law which makes the acquisition of distressed assets more attractive to investors.

On 7 June 2016 PwC hosted a seminar to discuss the opportunities that the Indian distressed debt market presents for investors. We discussed the outlook for the Indian economy, the significant increase in the volume of distressed assets and the changes in the regulatory landscape that are giving rise to significant opportunities for investors.

We believe India’s economic prospects are improving with inflation falling from 10% to below 6% in the last four years and significant reductions in the trade deficit from around 5% to 1% of GDP. While the leading advanced economies are growing at only around 1-2%, India’s forecast 7-8% is expected to remain above China’s over the next few years (based on PwC’s main scenario and IMF projections). In the long run, India should benefit from a relatively young, fast-growing labour force and the potential for investment-led growth.

Between 2012 and 2015, the total value of stressed loans has soared from $45bn to $120bn.

The Reserve Bank of India (RBI) and Modi’s government recognise the need for banks to clean up their balance sheets. The recent passing of The Insolvency and Bankruptcy Code should go a long way to improve the Indian investing environment. Although Rajan announced his departure from the RBI last weekend, we expect the framework he set up for recognising stressed loans to continue to operate going forward.

There have been some early movers into the market for Indian distressed debt so we also discussed the approaches that some investors have taken, given restrictions on foreign investment, and what deal opportunities there are.

For the full details download our report here.

Get in touch if you would like to discuss any aspect of the investment opportunities in Indian distressed debt. Or share your thoughts via the comments box below.

Richard Thompson |  Global Leader, Portfolio Advisory Group
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