Verde Partners Sees Rebounding Economy Lifting Credit Demand

For Varde, which currently has an exposure of $2 billion to the Indian market, fresh borrowing accounts for nearly half of its investment activity here, with the rest of the debt stressed.

“Today, lending represents almost half of our investment activity in this sector, and we expect to see more opportunities as the market continues to grow,” Sandeep Chandak, Managing Director, Verde Partners said in an interview.

Chandak said that apart from rising bad loans, India has experienced extreme volatility in the non-bank lending sector, leaving borrowers with few options to access funds.

“The additional impact of COVID-19 has led to an even greater demand for alternative loans, creating an opportunity to lend and support good quality business. Ultimately, the market for loans and assets has grown steadily against the backdrop of limited supply of capital, based on supportive fundamentals,” Chandak said.

“The vast level of credit demand creates a wealth of investment opportunities but requires the necessary infrastructure and relationships to access the market. The ability to filter deals and underwrite credit quality is just as important as the crisis-ridden market.” No more than that,” he said.

While Varde does not have a dedicated geographic allocation of capital, Chandak said he sees both the size and capital of the team deployed in India to continue growing. India represents 36 per cent of Verde’s Asia-Pacific investments, the largest commitment in the region. The firm has a strategic partnership with Aditya Birla Capital in India.

Verde has inked deals across sectors, including a $155 million facility to refinance and fund more than 2.5 million square feet in two Grade A developments owned by the Phoenix Group located in Hyderabad; Deals with GMR Airports and GMR Infrastructure buys Punjab National Bank’s exposure in KSK Mahanadi Power with Aditya Birla Capital.

Verde is also evaluating opportunities in the troubled lending sector along with new lending.

Chandak said the firm is seeing more activism on the part of the banks to resolve the tense situations before the assets come up in the bankruptcy courts.

While the Insolvency and Bankruptcy Code (IBC) has given rise to some major resolutions, the IBC has been mandated to help improve India’s corporate credit culture, procedural issues and long-drawn timelines for bankruptcy resolutions. Made a little less attractive in some cases.

“From our experience in one-time settlement, we have seen dynamism from banks and other stakeholders and genuine willingness to resolve the issues before the formal IBC process. Through the IBC framework, there is a clear process for all parties to ultimately reach a fair settlement. However, if things can be agreed and resolved before the formal process, then it is in the best interest of all stakeholders,” Chandak said.

He added, “It achieves a quick outcome for all parties and most importantly brings the business back to a stable financial level soon, with the return of growth and the right capital to take advantage of market opportunities.” Is.”

Varde was part of a consortium of investors that led one of the largest lump-sum settlements in India, worth $922 million, in December 2019 in the case of crisis-ridden power producer RatanIndia Power Ltd.

The IBC was a game-changer that gave investors certainty about the legal framework, and how regulators were approaching the market. Verde said the stability around the IBC framework has been commendable and instills greater confidence among investors, which will help attract even more international capital.

“As far as percentage haircuts are concerned, we believe this should be viewed on a case-by-case basis and it is difficult to generalize as ‘average’,” he said.