IL&FS joins hands with global PE fund Lone Star Funds

MUMBAI: India’s infrastructure investment firm IL&FS has joined hands with global PE fund Lone Star Funds to form a stressed assets fund that will buy Indian stressed assets from the banking system. The fund will have a $550 million of capital pool, leading to an asset purchase of up to $2.5 billion, the companies said in a joint release on Sunday.
The joint fund will assist banks, private equity investors and asset reconstruction companies recycle capital, thus permitting reinvestment capital in fresh projects.

Founded in 1995, Lone Star invests globally in operating companies, real estate, equity, credit, and other financial assets. It invests on behalf of its fund limited partners, which include pension funds for public sector and corporate employees and retirees, as well as foundations and endowments that support medical research, higher education, and other philanthropic causes. It has raised $70 billion till now globally and has closed more than 1,350 transactions with an aggregate purchase price of $180 billion (including acquisition financing and co-investors), the company release said.

To match this, IL&FS has built a strong portfolio of infrastructure projects aggregating to $25 billion.

“Lone Star looks forward to collaborating with IL&FS in reviving Indian infrastructure assets and benefitting from IL&FS’s long track record as a successful developer and manager of infrastructure projects in India,” said Mark Newman, President, Asia Pacific, Lone Star.

“The India infrastructure sector is poised for revival as the evolving framework is becoming more conducive for resolving stressed assets. The collaboration with Lone Star is strategic and presents the potential to attract sizeable foreign direct investment (FDI) into India which supports the initiatives of GoI and RBI,” Ravi Parthasarathy, Chairman, IL&FS.

Indian banks have been reeling under the pressure of mounting bad loans. Some of the lending institutions have been unable to lend new capital due to the amount of stressed loans on their books. After the government of India announced that it would bring in a new bankruptcy code, a lot of special situations funds have been eyeing the growing Indian pie. In 2014, global PE fund Aion Capital collaborated with India’s ICICI Venture to launch a special situations fund of more than $1 billion.

Some of the other recent entrants in the distressed assets market have been Piramal Group along with Bain Capital, State Bank of India (SBI) and Brookfield Asset Management, Kotak Mahindra and CPPIB, Ambit Holdings and New-York’s JC Flowers & Co. among others.