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Liberty House Willing To Spend More Than $5 Billion In Picking Stressed Assets In India

It’s a once-in-a-lifetime opportunity to buy businesses in India if you are a picker of stressed assets. The Liberty House Group says it is and is willing to invest serious money to bag some of these assets.

“In general terms, our comfort zone in different hubs has been $5-10 billion. That’s the point at which we feel we have scale in a country,” Sanjeev Gupta, founder of Liberty House, told BloombergQuint in an interview. The eventual investment that the group makes will depend on the assets it manages to win through the insolvency process.

The Indian banking sector has bad loans of over Rs 10.5 lakh crore. A large chunk of these are getting resolved under the Insolvency and Bankruptcy Code.

Liberty House emerged as the successful bidder in the case of at least two stressed companies—Amtek Auto Ltd. and Adhunik Metaliks Ltd. The investment in Amtek Auto, together with affiliate businesses, works out to a little more than $1 billion, said Gupta while adding that Adhunik Metaliks is a small investment.

Liberty House is still in the race for two other large assets. This includes Bhushan Power & Steel Ltd. and ABG Shipyard Ltd. In the case of Bhushan Power & Steel, a rival bidder JSW Steel Ltd. has offered a higher amount than Liberty House, BloombergQuint reported earlier this month. The resolution plan for ABG Shipyard is pending before the Ahmedabad bench of the National Company Law Tribunal.

Each of the businesses that Liberty is bidding for fits in to the group’s broader global strategy, said Gupta. That is to get into allying but different businesses. For instance, an investment in Bhushan Power & Steel would bring in a primary steel asset, ABG Shipyard would provide a platform for recycled steel and Amtek Auto would fit into the downstream end of that business.

The key attribute of our strategy is that we want to be present across the value chain down to the finished consumer products which are used by consumers.
Sanjeev Gupta, Founder, Liberty House Group

Each of the businesses that Liberty House buys will be run independently by a local management. They would, however, be part of a global portfolio of businesses in individual verticals. Liberty House may also appoint a country manager for the assets it holds in India.

Gupta clarified that the group is not getting into any businesses where it is currently not present. According to the group’s global website, its businesses currently include commodities, steel, aluminum, recycling and engineering.

Apart from the assets that Liberty House has already expressed interest in, the group is also looking to bid for assets on the RBI’s second list of stressed assets that are currently under resolution.

“For instance, in place of Bhushan, we could look at a string of pearls strategy in that segment. It may be tougher to manage but it could be a better value proposition,” said Gupta.

Who Are The Investors?

The interest shown by Liberty House—a relatively lesser known entity in India—in stressed assets has raised some eyebrows. Questions have ranged from the source of funds to the intent behind acquiring these assets.

Being a private group, there is limited information available publicly about the group, its sources of funding and its financial position.

Gupta claims that the intent is to run these businesses and not sell after holding them for a short period. As a family, we have never sold businesses after buying them, he said. “We are looking to create wealth for our next generations....We think of time in the context of generations, not years.”

The group is privately held and the funds for investment are coming from the family, said Gupta. He added that as the business grows, the group will look at taking on debt for individual assets.

Why hasn’t the group invested in India so far?

India is a tough place to do business. It continues to be a tough place to do business. We see it getting much better...That, plus the opportunities that the IBC has presented, has made it compelling for us to come to India. Across all our sectors, we hope to make India one of the biggest hubs.
Sanjeev Gupta, Founder, Liberty House Group

A Stressed Assets Platform?

While Liberty House has so far bid for individual businesses, it is also toying with the idea of creating a stressed asset investment platform, said Gupta.

“One of the options is that we launch platforms. So instead of looking at just the public markets, we could actually look at funds where we have co-investors or (funds) we seed,” he said, adding that this idea is being actively discussed by the group.

Should the group go down that route, the core strategy would still remain one of long-term investments, Gupta said.

BQ Conversations | Liberty House has won two stressed assets and is in the fray for at least two more. What is the group’s strategy for India?

Posted by BloombergQuint on Wednesday, August 22, 2018