Temasek Holdings expects Indian companies to continue selling assets to pare debt as corporate balance sheet stress rises.
"For the first time, companies are selling some of their good assets to deleverage," Mr Rohit Sipahimalani, a senior managing director at Temasek, told a Bloomberg private equity forum last Friday in Mumbai.
Heavily indebted Indian companies announced up to US$20 billion (S$28 billion) of divestments in the last year as they sought to cut debt, Mr Sipahimalani said.
Company founders are doing deals as they seek "to rescue their reputation and want to get on with their lives", Mr Sanjay Nayar, chief executive officer of KKR's India unit, said at the forum.
Banks in India have started forcing delinquent borrowers to repay loans by selling assets, said Mr Sipahimalani. That will drive more deal flow and help resolve the country's bad debt crisis.
The improved environment has attracted investors like TPG, which on Friday said it plans to invest more in India. Any deals will build on the record US$81.2 billion of mergers and acquisitions announced by Indian firms last year, Bloomberg data shows.
"In India in particular, you have a moment where so much is changing at the industry level," Mr Jim Coulter, TPG's co-founder and co-chief executive officer, said at the forum. "Private equity has a massive role in sorting it out."
The billionaire Ruia brothers last October agreed to sell control of the nation's second-largest refinery to a group of investors, including Rosneft and Trafigura, for about US$13 billion including debt.
Jaiprakash Associates, which had defaulted on debt repayments, said last year it will sell cement capacity across five states to UltraTech Cement at an enterprise value of 161.9 billion rupees (S$3.5 billion).
KKR's Mr Nayar said there are opportunities in the industrial sector, particularly in manufacturing facilities, while high valuations are making investors wary of deals in financial services.