Opportunities in an emerging distressed debt market typically arise due to benign credit standards and global macro headwinds, which cause a market disruption. Further, complexities such as political instability, regulatory hurdles and local laws in emerging markets, especially in India, create more pronounced disruptions and offer unusual opportunities for a bargain purchase. Asset managers need requisite experience, on-the-ground relationships, and a long-term investment horizon to identify and take advantage of such opportunities.
Many asset managers are concerned about their inexperience in understanding the cultural and legal differences across emerging markets, which prove critical in making successful investment bets in such markets.
The purpose of this paper is to give an overview and challenges faced while investing in the Indian distressed debt market. The paper also identifies untapped opportunities in India. We have also highlighted examples of two companies, which have defaulted in the past and are on their way to recovery.