IL&FS, Lone Star form $550m India distress partnership
India’s Infrastructure Leasing & Financial Services (IL&FS) has launched a $550 million fund to invest in domestic distressed infrastructure assets with US-based GP Lone Star Funds.
The fund will buy underperforming assets currently held by other GPs, asset reconstruction companies and banks, aiming to help these investors recycle capital and reinvest in new projects. In a joint statement the firms said the partnership could purchase up to $2.5 billion in assets.
Lone Star and IL&FS are relatively late to India's distressed asset space, following a wave of similar joint ventures between global GPs and local firms announced last year. The partnerships include J.C. Flowers and Ambit Holdings, Canada Pension Plan Investment Board (CPPIB) and Kotak Mahindra Group, Brookfield Asset Management and the State Bank of India (SBI) and Caisse de dépôt et placement du Québec (CDPQ) and Edelweiss Group.
In addition, Apollo Global Management announced joint ventures with both ICICI Bank and the International Finance Corporation and TPG Capital indicated it planned to invest up to $3 billion in Indian distressed assets over the next three years.
PE interest in Indian distressed assets has surged recently as the country's large volume of non-performing loans forms a growing drag on bank balance sheets. The overload of bad debts is also of concern for regulators, who have indicated willingness to give debt holders more power over underperforming companies.
IL&FS Investment Managers, the PE arm of IL&FS, is currently investing its latest growth fund, Tara IV, which closed in November at $60 million. The fund is sector agnostic but seeks growth capital investments primarily in manufacturing, retail and logistics.
The GP is also raising a $500 million infrastructure fund, launched in 2015 and focused on domestic road and energy projects. Waste management, ports and logistics assets will also be considered.
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