The Hindu Business Line : A turnaround specialist for stressed assets

Mumbai, Dec 10 Many overseas investors are willing to bet on stressed assets in India and the turnaround specialists here are trying to tap this new business opportunity.

The Mumbai-based Trans-Continental Capital Advisory, a specialist in restructuring and reviving sick companies, says several foreign investors are keen to invest in stressed assets. The company is now planning to float a Rs 500-crore India-dedicated offshore fund to invest in sick companies which can be revived.

Set up in late 2006, the firm has so far been instrumental in restructuring and reviving three companies in the agri-related sector.

According to Mr Ashesh Shah, one of the founding-directors, “There are lots of opportunities for companies which are fundamentally good and have good management, but are distressed for reasons beyond their control. Special financial skill sets and patience are required to rehabilitate these companies.”

Mr Shah has worked in specialty advisory firms in the US focussing on restructuring and turnaround and thereby has adequate expertise in this area.

The first company that Trans-Continental restructured was EPC Industries Ltd, a micro-irrigation equipment manufacturer, based in Nashik. EPC was the second largest player in this segment after Jain Irrigation. It suffered losses after the Government reduced the subsidy given to drip irrigation. As the company had already increased its production, its sales took a hit, Mr Shah said.

After the restructuring, which involved investment of Rs 40 crore (Rs 21 crore equity and Rs 19 crore debt), its revenues in the first six months were more than the entire revenue of the previous year.

“Once you unleash the sick companies from their old debt, their revenues grow rapidly,” Mr Shah said.

After identifying the stressed company, Trans-Continental negotiates with the lender banks and advises a one-time settlement, said Mr Jayendra Shah, another founding-director. “We pay money to the company to pay off the bank loans. So banks recover NPAs and the company is able to resume its operations,” he said.

reasonable returns

Trans-Continental works with speciality investors who invest in these kinds of turnaround ventures. They are based out of the US. Such investments offer reasonable returns and the period for returns can vary from two to five years, he added.

Trans-Continental has also worked with Mahaan Proteins Ltd (MPL), a producer of ghee, casein, lactose and whey protein concentrate. The German technology used by the company was meant for processing cow milk to extract casein. It could not process buffalo milk, which is more commonly available in India, due to the higher fat content. The investment in Mahaan was Rs 30.5 crore of equity and senior secured debt of Rs 4.5 crore.

Trans-Continental is now planning to float an India-specific fund of Rs 500 crore within one year. The fund will invest in sectors such as auto components, textiles, agri and agri-related. “We will look at sectors that were distressed in the past but now there is scope for revival,” Mr Shah said.

More Stories on : Venture Capital | Sick Units

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