In a fireside chat, Shyam Maheshwari, Chief Executive Officer, SSG Capital Management Limited; Haseeb Malik, Senior Managing Director, Ward Partners Inc., discusses the risks and rewards associated with investing in stressful assets and how they create opportunities.
Shyam Maheshwari tells about the recent developments around stressed assets resolution. They are a $4.5 billion platform today. India has happened to be a large part of our investments since 2009. The economy has a tailwind of growth, said Shyam Maheshwari. They have put in resources, talent pool and capital as well as processes. It’s a market you have to work hard for, he said. They have done 14 steel site visits in the last two years but they haven’t concluded a deal in India yet. It takes time but there’s nothing called wasted learning, he said. According to Shyam Maheshwari, foreign investors have to continuously work on the process of executing things and are ready to invest their capital in India.
Mr. Shyam Maheshwari also said about the challenges they face in the country. Assets have to be fundamentally sound. Operating assets could have been mismanaged. Operating a completed asset is the first criterion. They thought about the steel cycle and realized that the government came up with the process which created a flow to steel prices in India. The same thing is happening in China too, said Shyam. Non-operating assets are shutting down. In that context, they had started looking at those assets and at that time the law (Insolvency and Bankruptcy Code) had not been enacted and there was no process of restructuring.
According to Maheshwari, diligence is a learning process. As he said one has to be in the game to learn the game. They put the resources and people on the ground. They are paying to learn the game. The process is fine. It’s all about being there and contributing positively.
“Expectations of our investors are similar to us. On the equity side, you just can’t make a quick buck and then leave. We have a long duration fund of eight-10 years. We need that kind of time to figure out our way. You have to create that process, discipline and risk-reward as an investor and it is not different from what a strategic investor would do”, said Shyam Maheshwari.
According to Mr Shyam Maheshwari, Challenges are opportunities. Firstly, one has to be in the game. Their fund is a long duration fund with no leverage. The second aspect is that doing business is not easy. Things that he would like to change in IBC would be the bias for strategic investors over financial investors. It’s very clear how the committee of creditors think today. Asking Rs500 crore for an initial deposit is not possible. One has to think that time is valuable and money is valuable. And I think this would happen over some time.
“We are cognizant that every asset is not for us. It’s difficult to assess the liabilities”, said Shyam Maheshwari.
He is an optimistic because the process in front of his eyes has changed positively. The whole part of foreign portfolio investments (FPI) to invest in debt instruments is good. This has created a level playing field for foreign and domestic funds and much more is required to solve the problem of the mammoth size that face. Many things have ramifications when the company goes into debt. Salaries are not paid; the income tax department is after your life and this cannot be underestimated. The process is improving, creditor rights are recognized. The attitude is changing and this NCLT process is a level playing field in itself, concluded Shyam Maheshwari.