India needs to prove a strong stressed asset ecosystem is working on ground: Dinkar Venkatasubramanian

If India has to attract private debt to fuel growth, it needs to give investors the confidence that a strong stressed assets ecosystem works on the ground, Dinkar Venkatasubramanian, head – debt & special situations, EY India and president – INSOL India, has said.

In a social media post, Dinkar Venkatasubramanian, who is also an insolvency professional, says the biggest roadblock to achieving this will be a lack of willingness of management and lenders to recognise a problem when they see it and act early to arrest the erosion of value. 

This, he says, coupled with the lack of a mechanism to fix accountability on the main players – the borrowers and the lenders.  Banks should back their employees to get better results via early intervention while better corporate governance enforcement could hold borrowers accountable.

The second biggest roadblock, according to him, is the tendency to use Insolvency and Bankruptcy Code (IBC) as the panacea, rather than using it as a threat to enforce better behaviour. What is needed now is a wider set of solutions outside of IBC that can be deployed as per the need of the situation.  To this end, the June 7 Circular, the lender-led prepack proposal and mediation are all great ideas.

A flexible approach combined with a sense of urgency will help get better outcomes — set against the threat of insolvency.

Dinkar Venkatasubramanian highlights two other aspects that should take centre stage with respect to the development of the ecosystem.

First, he talks about is focus on operational improvement and turnaround. He says capital resolution is only a temporary measure, turnaround is the real deal.
“The focus on operational turnaround should not be lost – before, during and post the resolution/insolvency of corporates. All stakeholders should be focused on the same because a lack of focus will impact all of them,” he says.
He also stresses on the need for development of a secondary market for stressed assets, which he says will drive better value and attract more bidders.

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