Shyam Maheshwari on the recent developments around stressed assets resolution

Shyam Maheshwari on the recent developments around stressed assets resolution

Shyam Maheshwari

Shyam Maheshwari is the founder and partner of SSG Capital Management.

Maheshwari serves on the Ares SSG investment committee and is a director of Ares SSG Singapore. He focuses primarily on origination and evaluation of investment opportunities in India and other regions throughout Asia. In his former position at SSG Capital, he was extensively involved in deal sourcing, analysis and investing in Asia and business development in India.

Timely and proactive restructuring of stressed assets will also provide much-needed breathing room to the IBC to clear its large backlog, says Shyam Maheshwari of SSG Capital. He hopes that it can save the IBC before a potential next wave from the impact of Covid19. He identifies that stressed assets 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. They have put in resources, talent pool and

capital as well as processes. India is a market you have to work hard for”, Shyam Maheshwari said.

“Until the IBC resumes stressed and distressed companies will either continue to limp along, knowing their fate but impotent to change course or they may revert to the pre-IBC status by compromising and doing arrangements under the Companies Act with the bias on lenders to determine debt restructuring, Mr. Maheshwari says.

Shyam Maheshwari also speaks about the recent developments around stressed assets resolution in India. Foreign investors 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” says Mr. Maheshwari.

Shyam Maheshwari also provides some factors to identify a successful debt restructuring. “Firstly, pick the industry or sector carefully before engaging with an existing lender. Make sure the selection plays to your expertise and experience and is ripe for disruption (energy, shipping and aviation). Secondly, one should conduct deep diligence to understand the business. Differentiate between the need to fix the business as opposed to fixing the balance sheet. The latter is always easier.

Determining the efficacy of the existing management, changing if necessary and agreeing a path to fill gaps is the third factor”, Shyam Maheshwari explained.

According to him, the fourth factor is negotiating an acquisition price that creates a sustainable capital structure for the underlying business while ensuring alignment of interest between various stakeholders. The fifth factor is to create buffers in the business plan for contingencies while recognising that things will not operate like clockwork. It invariably takes longer for things to fall into place, he says.

In his view, the temporary halt on referrals to the IBC is a timely moment to reflect on its efficacy and ask how the process can be sharpened for a more impactful resumption. Most assessments of the IBC are based on the number of companies that have gone through its doors and emerged with a buyer at a reasonable price. In summary, timely and proactive restructuring of stressed assets will also provide much-needed breathing room to the IBC to clear its large backlog - before a potential second wave from the impact of Covid19.