India’s distressed assets: What next?

Hello,

This week, Innomotics India agreed to acquire Siemens’ low-voltage and geared motors business, a significant industrial consolidation with global implications and strong M&A relevance, especially as multinationals rejig portfolios and shift production toward India.

Meanwhile, ICICI Prudential AMC is preparing an acquisition in the PE space. It is a rare move for a domestic asset manager to reckon with the riskier asset class. If this comes through, it could reshape the competitive landscape for homegrown managers, alter LP allocation options, and push India deeper into alternative assets.

And, Shriram Pistons has bought three companies for ₹1,670 crore ($185 million), a neat manufacturing roll-up.

Finally, climate-tech funding dipped as VCs figured they preferred exportable solutions, prioritising defensible IP and global markets over the government subsidy-linked domestic play.

I hope you enjoy this week’s roundup – please connect on LinkedIn to discuss how Ideals VDR can help with your next M&A deal.

Let’s dive in.

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S&P’s happy upgrade and Parliament’s unhappy warnings

It seems schizophrenic – just as S&P upgraded India’s insolvency framework for becoming more creditor-friendly, policymakers in Delhi warned the system being celebrated was slow, costly, and prone to value erosion. 

The ratings group thinks India’s laws governing restructuring of distressed assets – under the Insolvency and Bankruptcy Code (IBC) from Group C to Group B – are improving by offering better protection of creditor rights. 

In other words, it seemed pleased that the balance of power was moving decisively toward creditors, including the real possibility that promoters (family-run business owners) could lose control if they failed to resolve dues, a departure from the era where promoters stayed in command.

The agency also noted materially stronger outcomes: average recovery rates had risen to 30%, compared with 15-20% earlier. Meanwhile, resolution timelines had shortened from 6-8, to roughly two years.

Yet, India trails S&P’s top-tier Group A jurisdictions, largely due to persistent delays, litigation overload, and procedural bottlenecks. Recent Supreme Court (SC) rulings reinforcing creditor rights were welcomed by lenders and investors.

So what for stressed asset dealmaking?

A higher jurisdiction ranking increases investor confidence in the enforceability of creditor rights and predictability of outcomes, supporting improved pricing for distressed deals. 

Banks and financial investors may now feel more comfortable participating in resolution auctions or bidding for stressed assets, with global risk analysts viewing India more favourably, one hopes.

But even as the SC and the upgrade signal current improvement, a Parliamentary panel called for sweeping reforms to rescue and streamline the insolvency ecosystem. It said the system needed an overhaul of the rules setting out a number of recommendations to target speed to resolution, reducing litigation, and improving outcomes, which included the following suggestions:

• Advance ruling mechanism: Resolving key legal and factual issues before formal admission of a case, reducing avoidable litigation that stalls progress.
• Mediation and ADR: A structured mediation pathway to divert disputes away from tribunals and reduce caseload pressure.
• Digital ‘no dues’ system: A centralised digital platform to issue no-dues certificates and statutory clearances once a resolution plan is approved, enabling revived companies to restart operations without legacy frictions.
• Greater NCLT capacity, and more tech: More NCLT (National Company Law Tribunal, a quasi-judicial body) benches and rapid rollout of case-management tools such as the iPIE platform to improve handling efficiency.
• Deterrence against frivolous appeals: Upfront security deposits to discourage ‘vexatious’ appeals that delay the resolution process. 

The panel aims to address structural chokepoints, litigation bottlenecks, unclear early-stage positions, and tribunal overload – all of which erode enterprise value and scare investors.

The S&P and the Parliamentary committee’s blueprint together suggest an insolvency framework that is not actively evolving toward global best practices, with major implications for M&A in stressed assets and turnaround and special situations investing.

In conclusion, India’s resolution regime is improving, but will the next wave of reforms unlock greater value?