What are Distressed Asset Funds?
Distressed Asset Funds acquire Non-Performing Assets (NPAs), stressed loans, and equity in financially troubled but operationally viable businesses at significant discounts to their intrinsic value. Returns are generated through operational turnaround, legal resolution (IBC/NCLT), or asset monetisation.
- Deep Value: Acquire assets at 30–70% discount to intrinsic value
- IBC Tailwind: India's Insolvency & Bankruptcy Code provides structured resolution
- Operational Turnaround: Fund managers drive efficiency improvements post-acquisition
- High IRR Potential: Target returns of 20–30%+ IRR on successful resolutions
- Portfolio Effect: Diversification across multiple stressed situations
Distressed Investing Process
Resolution of stressed assets follows a structured IBC/NCLT process:
- Identification of stressed assets through bank NPA databases and IBBI records
- Detailed due diligence: legal title, environmental, operational assessment
- Resolution Plan submission under IBC or direct negotiation with banks
- NCLT/DRT approval of resolution plan and asset takeover
- Operational turnaround, asset monetisation, or strategic sale for exit