India’s Aditya Birla Forms Joint Venture With US Based Varde

US-based investment company Varde Partners Inc. and India’s financial services provider Aditya Birla Capital Limited (ABCL) have formed a joint venture to invest in stressed and distressed assets in India.

As information on the joint venture came out, shares of ABCL on benchmark Bombay Stock Exchange (BSE) climbed as much as 4.8 per cent on Thursday (23), the biggest intraday gain recorded after July 26.

An upward movement in ABCL shares came amid a 0.1 per cent slump in the broader S&P BSE Sensex. ABCL shares opened at Rs 140.70 and touched an intra-day high of Rs 144.80 to close at Rs 14.05 recording an uptick of 4.23 per cent on Thursday.

According to the deal, Minneapolis based Varde will acquire a 50 per cent share in ABCL’s asset reconstruction business for £ 10.63 million, the Indian company said in a filing without specifying the actual size of the planned investment to be made by the duo. However, sources claimed that the joint venture aims to put as much as 0.77 billion pounds into stressed and distressed assets in India over the next three years.

As per the plan set up by both parties, “operating through a joint platform, both parties will evaluate investments across sectors, focusing on the acquisition, restructuring and resolution of the substantial supply of non-performing assets in India as well as special situations financings. Given the current landscape and further prospects in asset reconstruction in India, ABCL and Varde believe there is an attractive pipeline for strong capital deployment opportunities over the next several years,” said Varde in a release.

Ajay Srinivasan, Chief Executive of ABCL said, “The asset reconstruction company (ARC) business is a strong addition to the businesses we already have at ABCL. We see a large opportunity in the distressed space, especially in the mid-corporate segment. One of the things that we bring to the table as a group is that we understand how to run many businesses.”

“We are looking at leveraging this skill set as we enter this new business. Thus, our decision to enter into a joint venture with Varde Partners, who bring restructuring expertise to augment our core strength. The expertise and experience of both ABCL and Varde, makes this a strong combination to capitalise on the opportunity that India presents,” Ajay Srinivasan added.

“Varde currently manages about £ 10.75 billion globally, and has invested nearly £ 383.81m in India in the past five years across corporate stressed, distressed, special situations and lending assets. With regional headquarters established in Singapore in 2008, Varde expects to open its fifth Asia office in Mumbai later this year,” Varde said in a statement.