UVMAIT – UV SPECIAL SITUATION FUND
UV Special Situation Fund is the first scheme launched by UV Multiple Asset Investment Trust. The scheme has been launched to tap the deeper sections of the stressed assets market in India. The scheme will mostly invest in opportunities in companies or other entities or assets of such companies or entities in India that are experiencing financial stress or distress, or showing a potential for distress, by participating in equity / quasi equity securities, debt securities, mezzanine debt and / or security receipts issued under the various schemes of trusts declared by Asset Reconstruction Companies (“ARCs”) or other permitted financial entities, high yielding debt instruments, last mile funding including interim finance, and participating in acquisition opportunities in processes such as Insolvency and Bankruptcy Code in a co-investment model.
The scheme is a sector agnostic fund and would be primarily focusing on the sectors of Indian economy. The scheme will primarily invest in stressed assets which have turn around potential. The scheme proposes to invest in all asset classes with an investment horizon of 2 – 4 years.
Opportunity in India’s Stressed Asset Market
The stressed assets ecosystem in India has undergone massive disruption since the advent of the IBC. Faster and timely resolution and greater transparency have boosted the confidence of special situation funds. The introduction of carve-outs for SMEs under section 29A of the IBC, followed by pre-packaged insolvency resolution process, emphasised the need for such special situation funds to act as an intermediary between promoters and financial institutions. It also created a greater market for such special situation funds.
With increasing compliance requirement by the RBI over recognition and treatment of stressed assets by financial institutions, coupled with the economic slowdown in the country in 2019 and Covid-19, there will be a sizeable increase in stressed assets. Thus, the participation by such special situation funds will be imperative to continue the resolution story in the country.
India’s stressed asset market is around $115-120 billion, as per industry estimates. The RBI expects NPAs to increase by additional $70-80 billion by the end of 2022-2023, amid stressed global economic conditions and new infection waves.
However, NPAs with issues such as working capital needs, less assets inflation, lower interest rates, delayed project, could be resolved through long-term financing from domestic and international investors. This represents a unique opportunity for long-term investors to spend in distressed assets available at attractive prices.
Besides availability of the large pool of stress assets, India’s long-term growth story and attractive valuations driving interest for stressed assets.
India is fastest growing economy which provides good opportunity to long-term investors to invest in distressed assets as they are available at attractive prices with potential for growth after restructuring and reviving business.