Canada fund Brookfield targets Indian infra as stressed assets rise

Photo: Bloomberg

Brookfield Asset Management Inc., Canada’s largest alternative asset manager, is seeking new investments in Indian infrastructure, including telecom towers, as companies in the South Asian nation pare assets to reduce debt.

Indian firms are facing decreased access to capital as the country’s central bank pushes lenders to address stressed loans on their balance sheets rather than extend new credit, said Anuj Ranjan, managing partner and regional head of Middle East and South Asia at Brookfield. Instead of borrowing, firms are considering asset sales to help reduce debt and increase liquidity.

Brookfield is weighing new Indian investment targets after agreeing last month to buy Reliance Communications Ltd.’s mobile-phone tower business for an upfront payment of 110 billion rupees ($1.6 billion), in what would be the largest deal by a private equity fund in the country.

“As companies shed assets, especially in asset-heavy, large-ticket areas like real estate and infrastructure, it just so happens that these are the areas we know a lot about, areas that we are comfortable with,” Ranjan said in a phone interview from New York on Oct. 28. “As these opportunities come up, we keep looking at them.”

Telecom Exposure

Brookfield is considering increasing its exposure to sectors including infrastructure and property in Asia’s third-largest economy as some Indian firms are mulling divestments. Bharti Airtel Ltd., India’s largest telecom company, has formed a panel of directors to evaluate its majority stake in tower company Bharti Infratel Ltd., according to an October exchange filing.

“Globally we are investors who allocate capital where it makes most sense,” he said. “It just so happens right now all those factors seems to be pretty aligned in India.”

Brookfield agreed to a couple of deals in October that increased its Indian assets under management by about $3 billion to $5 billion, Ranjan said. In addition to the Reliance purchase, the asset manager agreed to buy 4.2 million square feet (390,192 square meters) of commercial property from Hiranandani Developers Pvt for about $1 billion, he said.

After this transaction closes, Brookfield will own about 21 million square feet of space in India, he said. “There are periods when we invest and don’t invest in any market,” said Ranjan. “Right now we are very interested to keep investing in India.”

Stressed assets

In addition to its direct investments this year, Brookfield signed a memorandum of understanding with State Bank of India to set up a joint venture to invest in stressed assets in India in July. The Canadian fund plans to put about 70 billion rupees into the venture and SBI would contribute as much as five percent of total investment, according to an e-mailed statement.

The joint venture is looking at buyout opportunities and partnering with company owners and SBI on new loans, Ranjan said. “The focus in on stressed assets and stressed in the Indian market is thermal power generation, manufacturing and infrastructure.”

At the same time, Prime Minister Narendra Modi is seeking to revive a banking system burdened by about $120 billion of stressed assets and spur credit growth to support expansion in the $2 trillion economy. The ratio of stressed assets in India’s banking system surged to a 16-year high of 12 percent as of June 30, Reserve Bank of India data show.

“Government and banks have been very proactive in cleaning up the situation,” Ranjan said. “The stress situation will not last forever. As long as we can participate in that period, and acquire some businesses and help the banks and promoters on the way, I think we are happy.”