Restructuring & Turnarounds: The Indian Scenario, New Delhi

Contributed by: Parijat Garg, CFA

The Delhi chapter of the IAIP organised an Speaker Event on the topic ‘Restructuring and Turnaround: Indian Scenario’ on the 28th of December, 2013. The talk was delivered by Sajeve Deora, Director, Integrated Capital Services at the India Habitat Center in Delhi. The event was well attended by members as well as CFA candidates.

In what would turn out to be a very interactive session, Deora started off the presentation with an introduction to the various statutes and mechanisms for debt restructuring and recovery in India. The provisions of the Companies Act (both the 1956 Act as well as the new 2013 Act), Sick Industrial Companies Act and the Corporate Debt Restructuring mechanism (CDR), the Debt Recovery Tribunal and SARFAESI were introduced and explained. Given his long hands-on experience, the speaker then took through some of the practical issues involved in the actual enforcement and uses of these mechanisms, their interplay and the real-world needs of lenders as well as borrowers; diving deeper through various nitty-gritties vis-a-vis tax authorities, corporate guarantees, unrecognized derivative exposures and risks involving Government approvals for capital-intensive projects etc. Further, details were discussed regarding real-world behaviour of lenders, borrowers, banks and asset reconstruction companies. He explained some of the compulsions faced by each stake-holder and how reality interacts with the actual laws governing debt restructuring and recovery.

Moving to the evolving scene in the debt reconstruction area, Deora talked about the increasing role of Asset Reconstruction Companies (ARCs) and how they are beginning to thrive with liberalization in FDI in this area as well the liberalization of debt-trading rules. He also talked about new structures that are evolving in terms of specialized turnaround teams that work in tandem with Receivers as well as ARCs.

Intermingled in the entire presentation were interesting real-world examples of complicated debt-reconstruction issues involving multiple parties (some including borrowers, banks, urban development authorities and auction buyers). Some of the well-known cases (such as Wockhardt, Suzlon, Satyam Computers) were also discussed towards the end of the presentation.

– P G 

PS: Presentation is available on http://www.cfasociety.org/india/Pages/ContinuingEducation-Presentations.aspx