In a fireside discussion, Shyam Maheshwari, chief executive officer of SSG Capital Management Ltd, discuss the risks and rewards associated with investing in stressed assets and what they are making of the opportunity.
According to Shyam Maheshwari, they are a $4.5 billion platform today. India has happened to be a large part of its investments since 2009. The economy has a tailwind of growth. We have put in resources, talent pool and capital as well as processes. It’s a market you have to work hard for. We have done 14 steel site visits in the last two years but we haven’t concluded a deal in India yet, says Shyam Maheshwari. It takes time but there’s nothing called wasted learning. As foreign investors, we have to continuously work on the process of executing things and we are ready to invest our capital in India.
Out of the 12 stressed asset cases, Mr Shyam is interested in more than one out of the 12 cases. Even though Shyam Maheshwari have seen quite a few steel plants but did not end up doing a deal in India. He explains what are the challenges that are been facing in the country. As per Shyam Maheshwari, assets have to be fundamentally sound. Operating assets could have been mismanaged. Operating a completed asset is the first criterion. He thought about the steel cycle and he realized that the government came up with the process which created a flow to steel prices in India. The same thing is happening in China too. Non-operating assets are shutting down. In that context, he had started looking at those assets and at that time the law (Insolvency and Bankruptcy Code) had not been enacted and there was no process of restructuring.
Shyam Maheshwari also gives some sense of the diligence process, the competitiveness of the work of resolution professionals and also tells How satisfied is he with it. He finds it as a learning process. One has to be in the game to learn the game. We have put the resources and people on the ground. We are paying to learn the game. The process is fine. It’s all about being there and contributing positively.
In this space, entry is defined and exits have to be figured out. Expectations of our investors are similar to ours. On the equity side, you just can’t make a quick buck and then leave. We have a long duration fund of eight-10 years. We need that kind of time to figure out our way. You have to create that process, discipline and risk-reward as an investor and it is not different from what a strategic investor would do, explains Shyam Maheshwari.