Temasek sees India deals gathering pace as companies pare debt

MUMBAI (BLOOMBERG) - Temasek Holdings, the Singapore state investment company, 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," Rohit Sipahimalani, a senior managing director at Temasek, told a Bloomberg private equity forum on Friday (March 17) in Mumbai. Heavily indebted Indian companies announced as much as US$20 billion (S$27.94 billion) of divestments in the last year as they sought to cut debt, Sipahimalani said.

Company founders are doing deals as they seek "to rescue their reputation and want to get on with their lives," Sanjay Nayar, chief executive officer of KKR's India unit, said at the Bloomberg forum. Banks in India have started forcing delinquent borrowers to repay loans by selling assets, according to Sipahimalani. That will drive more deal flow and help resolve the South Asian nation's bad debt crisis, he said.

The improved environment has attracted investors like TPG, which said on Friday it's bullish on private equity in India and plans to invest more in the country. Any transactions will build on the record US$81.2 billion of mergers and acquisitions announced by Indian companies last year, data compiled by Bloomberg show.

"In India in particular, you have a moment where so much is changing at the industry level," Jim Coulter, TPG's co-founder and co-chief executive officer, said at the forum in Mumbai. "Private equity has a massive role in sorting it out."

The billionaire Ruia brothers agreed in October to sell control of the nation's second-largest refinery to a group of investors including Rosneft PJSC and Trafigura for about US$13 billion including debt. Jaiprakash Associates Ltd, which had defaulted on debt repayments, said last year it will sell cement capacity across five Indian states to UltraTech Cement at an enterprise value of 161.9 billion rupees ($2.5 billion).

KKR's 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. The country's retail industry is "a tough space" as business models are evolving rapidly, said Mintoo Bhandari, senior partner and managing director at Apollo Global Management in India.