“Bid should become null and void if insolvency process is not completed 6 mnths after approval of resolution plan”
The Insolvency and Bankruptcy Code (IBC) has provided many Private Equity Funds an opportunity to acquire quality yet stressed assets in India. Many PE and distressed asset funds have successfully acquired financially stressed companies through insolvency proceedings. Royal Partners Investment Fund, a Mauritius-based PE fund, acquired EPC Construction for Rs 900 crore through the IBC route. Mayur Ghule, Managing Director, RPMG Investment, talked to InsolvencyTracker.in sharing his experience with India’s insolvency regime.
Royal Partners Investment Fund made its first acquisition of a distressed company — EPC Constructions India — under the Indian Insolvency and Bankruptcy law. How was your experience with India’s insolvency law?
Royale Partners Investment Fund Limited (RPIF) has been successful in its bid for EPC Constructions India Pvt Ltd. Although successful in the bid, the acquisition is not yet complete as there are various issues which have been challenged in court. Currently, the matter is sub-judice. RPIF has other bids in the pipeline.
Are you looking for more such acquisition opportunities through the IBC route in India? Any particular sectors that you are focusing on in India, especially, in the distressed asset segment?
Yes, we are interested in the acquisitions through the IBC primarily in the EPC sector.
EPC Construction’s resolution took over one and a half year. Do you think procedural delays and unnecessary litigation during the resolution process is a big impediment, especially for funds like yours for whom time could be a big factor in deciding the attractiveness of the deal?
The IBC code needs to be further strengthened in India. We were initially expecting a transactional closure and NCLT approval after the CoC decision within 3 months of Letter of Intent (LoI) date. However, endless litigation has resulted in significant erosion in value. Now, with Covid-19, the impact on the company’s (EPC Construction’s) assets and value will be significant. We are a private equity fund where investors look at IRR as the key measure. However, delays result in investor funds, which have been allocated for the deal, being un-deployed.
How is EPC Construction doing under the new management? What are the major changes that the new management has brought about in the functioning of the company?
We have not yet taken over the management of EPC as the matter is in court
If you have to suggest two-three big changes in Indian insolvency law, what could be those?
We would like time-bound completion of the resolution process. I would suggest that courts first approve the admitted claims of creditors in the CoC before bids are invited. Apart from this, I would suggest if the process is not completed within, say a maximum period of six months, then the bid should become null and void.
Typically, what is your investment strategy, especially, when it comes to distressed assets?
The current IBC process provides protection to investors against past claims which is very good from an investor’s perspective. Our investment strategy is mainly to acquire quality assets at value, restructure the company and ultimately list the company.
You are a Mauritius-based fund. One reason for it could be that it is a favourable tax regime. Do you think with Indian government promoting Gujarat Gift City as International Financial Services Centre, many funds like yours would think of setting shop there?
Definitely, key to any such decision is the tax regime. However, we have not carried out a detailed study of the regulations (related to Gift City). We will, however, revisit this as we get more entrenched into India.
