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India’s NBFC crisis and revitalised bankruptcy process are creating new opportunities for Deutsche Bank as it steps up lending to cash-strapped tycoons and for purchase of distressed assets.
The German lender is seeing three times the volume of financing deals compared with 2018 when the NBFC problems erupted, according to Rahul Chawla, the head of global credit trading at Deutsche Bank’s India unit. He declined to provide specific numbers, but said the bank has helped deploy a couple of billion euros to Indian structured finance deals.
“For Deutsche Bank this is a very, very high level of commitment,” said Chawla. He expects to grow the size of his book by another 30 per cent in the next two years.
Goldman Sachs Groupand Apollo Global Management are among the other global firms to have spotted similar opportunities in India’s bad-debt woes, which have been magnified by the NBFC crisis that erupted in 2018 with the default of a major infrastructure lender. As the non-banking finance firms have retreated, Indian companies have been struggling to obtain credit, curbing wider economic growth.
Deep restructuring
Asian distressed debt is one of the few growth areas at Deutsche Bank as CEO Christian Sewing pursues a deep restructuring that involves the loss of 18,000 jobs worldwide, or roughly a fifth of total headcount.
Chawla said one element of Deutsche Bank’s push in India is lending to business tycoons against their equity holdings. Before 2018, that business was dominated by short-term funding from NBFCs and mutual funds, which have since retreated. “Earlier, borrowers in India were demanding their terms on everything from the size of the loan to pricing, and we were just one in the beauty parade,” said Chawla.
The balance then tilted, with borrowers seeking loans at prices which reward the risks lenders are taking, he added, noting that business owners are seeking more longer-term funding since the crisis. Chawla declined to mention specific transactions.
However, Deutsche Bank loaned $200 million to the Mistry family against their stakes in Tata Sons, to ease the tight liquidity conditions at Cyrus Mistry’s Shapoorji Pallonji Group.
As well as loans to company founders, Deutsche Bank India offers credit to commercial real estate, private equity firms and for one-time debt settlements by delinquent companies. The lender is also active in trading and providing funds for distressed debt purchases.
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