Canada’s Brookfield Asset Management Inc will invest about $1 billion (Rs 7,000 Crore) in a joint venture with State Bank of India to invest in businesses with stressed assets.
Brookfield Asset Management, Inc. is a global alternative asset manager which focuses on the real asset sectors of property, infrastructure, and renewable energy. The firm has over $200 billion of assets under management. The firm has over 100 offices in 20 different countries. Major public subsidiaries of the firm include Brookfield Property Partners, Brookfield Renewable Energy Partners, Brookfield Incorporações, Brookfield Canada Office Properties, Brookfield Office Properties, Brookfield Residential Properties Inc., Brookfield Real Estate Services, and Brookfield Infrastructure Partners.
State Bank of India (SBI) – headquarters in Mumbai – is an Indian multinational, public sector banking and financial services company. This government-owned corporation had more than 14,000 branches spread across 36 countries. As of 2014-15, the bank had assets of INR 20,480 billion (USD 310 billion).
SBI traces its ancestry to British India, through the Imperial Bank of India, which was formed after merger of Bank of Madras with two other bank, the Bank of Calcutta and Bank of Bombay. The Imperial Bank of India, in 1956, became the State Bank of India. The Reserve Bank of India had a 60% stake in SBI, which was taken over the government in 2008.
Both organizations have already signed a MoU for the joint venture, according to a statement released by SBI on Wednesday.
SBI will contribute up to 5% of the total investments.
“This approach of collaborating with global players will enable the banks in general and SBI in particular, to find alternate solution for resolution of stressed assets,” SBI Chairperson Arundhati Bhattacharya said in the statement.
Gross non-performing assets of 40 listed banks, as of March 2016, were at Rs.5.82 trillion, an increase of 93% from Rs.3.02 trillion in the same period a year ago.
The JV will evaluate and invest in stressed assets, while relying upon Brookfield’s operational expertise to manage recapitalized businesses. At a later stage, the joint venture may seek participation from other lenders in the identified assets.
According to Bhattacharya, this approach will be acceptable to both lenders and borrowers in situations where promoters are not able to infuse funds and lenders don’t want to take additional exposure.
It is yet now clear whether the fund will buy out bad loans from other banks or will invest in a stressed company’s equity.
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