Millennium Post

SBI launches Rs7,350-cr stressed fund with US firm Brookfield

Out of the total investible fund of Rs 7,350 crore, the New York-based Brookfield, which manages a whopping $240 billion assets, will contribute Rs 7,000 crore and the remaining 5 per cent or Rs 350 crore will come from SBI, a senior SBI official said.

When asked how soon the fund will be operationalised, the official said it will set up at the earliest and will be managed by Brookfield and the top management of the bank. Asked whether the fund will primarily snap up SBI's stressed assets, the official said "yes." 

"But we will also be open to others. SBI being the lead lender in most of the large accounts, most of the assets will be ours," the official added. 

SBI Chairman Arundhati Bhattacharya said, "This approach of collaborating with global players will enable the banks in general and SBI in particular to find alternate solution for resolution of stressed assets." SBI has been reeling under a mountain of bad loans for the past few years as the key sectors in the economy are faltering. Its net non-performing assets stood at 3.81 per cent or Rs 55,807 crore as of March 2016, against 2.12 per cent (Rs 27,591 crore) a year ago, while its gross NPAs jumped to 6.5 per cent from 2.5 per cent a year ago.

This is the second such fund after Kotak Bank roped in Canadian Pension Plan Investment Board (CPPIB) to launch a $525 million fund to invest in the stressed assets in March. The proposed joint venture will independently evaluate and invest in various stressed assets, and will rely on the New York Brookfield's operational expertise to manage recapitalised businesses, SBI said. 

Bhattacharya said such an approach will be more acceptable to both the lenders and the borrowers in cases where the promoters are not able to infuse funds and lenders are reluctant to take additional exposure. SBI said at a later stage the joint venture may seek participation from other lenders in the identified assets. 

"This is a great opportunity for us to continue to invest in the long-term India story, and we're pleased to be further expanding our private equity platform here," Brookfield India head Anuj 
Ranjan said. 

British govt fund CDC to invest Rs 1,000 crore for 15% of IIFL arm
IIFL Group on Wednesday roped in the world's oldest development finance institution, CDC Group of Britain, to expand its non-banking finance business under which the British government fund will pump in Rs 1,000 crore for a 15 per cent stake. This investment makes a second coming for the UK government-owned development finance institution as the CDC Group was the first private equity investor in the IIFL Group in the late 1990s. IIFL Holdings said under the agreement, CDC will make an investment of about Rs 1,000 crore in its wholly-owned subsidiary India Infoline Finance for a 15 per cent consideration in the company. 

Founded in 1948, CDC's mission is to support building of businesses throughout Africa and South Asia, create jobs and making a lasting difference to people's lives in some of the world's poorest places. It provides investment capital in all its forms, including equity, debt, mezzanine and guarantees, and this capital is typically used to fund growth. CDC uses its own balance sheet to invest and has AUM of 3.9 billion pounds. The CDC Group's recent investments in India include Narayana Healthcare, Ratnakar Bank and Pristine Logistics. The new money will help the IIFL Group expand the financing business and address capital needs of under-served segments through diversified offerings, said the Nirmal Jain- led company, majority owned by Canada-based NRI Prem Watsa. The investment is by way of compulsorily convertible preference shares, which on conversion, will result in about 15 per cent equity stake for CDC in IIFL Finance on a fully diluted basis. 
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