Prime Minister Narendra Modi since assuming the chair of Prime Minister in 2014 has been on an overdrive to bring foreign investments to India. Despite inheriting a wobbly banking system from the predecessors (Read: UPA), he has been able to earn the confidence of the investors. However, with a China-made virus wreaking havoc across the global economy, and investors packing their bags and leaving for their homes—India and its nascent financial markets still stands out and is seemingly the bright spot where investors are looking to punt their fortunes.
There is no hiding the fact that Coronavirus has crippled a lot of companies across the country but after PM Modi’s appeal, foreign money has started swooping in to relieve such distressed companies from their misfortunes. According to The Print’s report, global heavyweights like Apollo Global Management Inc. and Oaktree Capital Group have either struck recent India deals or scaled up their teams in the country in a push to invest in distressed assets. New York-based Cerberus hired a former Apollo and Citigroup veteran to establish and lead an India office in 2019.
The scale of the money pouring in the distressed financial Indian market can be gauged by the fact that according to Researcher Venture Intelligence estimates—funds to the tune of $1.5 billion have already been umped in distressed assets in India this year, 55% more than through all of 2019. That data only captures deals that have closed and doesn’t include others that have been recently announced such as Oaktree’s 22 billion rupees ($294 million) loan to lender Indiabulls Housing Finance Ltd. in July.
In December last year, a consortium led by Goldman Sachs Group Inc. and global investment firm Varde Partners LP agreed to buy 65.75 billion rupees ($922 million) of debt from an Indian power company in one of the largest restructuring deals outside the nation’s bankruptcy court.
And it’s not just the distressed companies that have been getting a large influx of capital from the foreign firms. As reported previously by TFI, the Indian companies had raised a record $31 billion in equity capital in the first six months of the year 2020 alone. Banks had been the most active issuers, raising $13.68 billion, followed by the energy and power sector with $7.05 billion, and consumer products with $3.41 billion.
More importantly, the record raising came at a time when India’s economy had contracted 23.9% in the June-quarter, year on year and the armchair economists had cast a pall on the preparations of the central government to tackle the ramifications of the pandemic.
The pumping of the money in the market, the Stock market not showing a steady ascent in green, and the increase in consumption—as seen by the growth in sales of automobiles and the general spurt in sales of goods during the Diwali festive season is an indicator that the economy is indeed getting back on track. While the armchair economists continue to pander with their agendas, the investors unperturbed by their pessimism continue to punt on India’s growth story—even helping to bail out the distressed companies with an eye on valuable future returns on the investment.
