Canada’s biggest pension fund is holding back from investing in India’s stressed-asset market as valuations for delinquent firms in the South Asian nation remain higher than other countries.
“It is purely the pricing,” Mark Machin, president and chief executive officer of Canada Pension Plan Investment Board, told reporters in Mumbai. “When we look at things on a global basis and when we look at things on a risk-return basis, we find the pricing in India high.”
CPPIB, with more than $255 billion under management, and compatriots Caisse de depot et placement du Quebec and Brookfield Asset Management are scouting for investment opportunities amid India’s $210 billion pile of soured debt. The cleanup will test India’s new bankruptcy system as some business owners are putting up stiff resistance to auctioning their assets on the cheap.
More investment opportunities will arise over the next month as lenders take more than 20 delinquent borrowers to insolvency court to meet a Dec. 13 deadline set by the Reserve Bank of India. These companies include Videocon Industries Ltd., Jaiprakash Associates Ltd. and IVRCL Ltd., BloombergQuint reported citing bankers it didn’t identify.
The defaulters will add to India’s so-called dirty dozen 12 large debtors that have been ordered to go through the bankruptcy courts pushing stressed assets under resolution to more than 3 trillion rupees ($47 billion).
“While there has been a lot of talk about distressed assets, the amount of meaningful investment opportunities hasn’t been that high so far,” Vikram Gandhi, senior adviser to CPPIB, told reporters. “While there has been a lot of stressed assets in the market the actual deal flow has been quite low.”
The pensions manager is looking for investments in financial services, infrastructure and renewables. It will also build the so-called Principal Credit Investments business investing in sub-investment-grade corporate debt through both primary and secondary transactions in the country, Machin said.
The fund has invested more than $4.7 billion in India since 2009 and has a nine-member team in the country now. It opened an office in Mumbai, its seventh outside Canada, in 2015.