A STUDY ON ALTERNATIVE INVESTMENTS IN INDIA

WITH SPECIFIC REFERENCE TO A CASE OF

INVESTMENT IN DISTREESED ASSET BASED ON
RESOLUTION PLAN AS PER GUIDELINES OF IBC

Company – Srinidhi Investments

Jagannath K (F18029)
 
About the company
 Srinidhi Investment Advisors Private Limited
(SIAPL), incorporated on 28 June 2010 is a
private equity firm and Cat II Alternative
Investment Fund that provides business and
investment advisory services to Indian
business enterprises.
 The company usually takes up long term

projects which have long gestation periods.

ALTERNATIVE INVESTMENTS & ITS ADVANTAGES

 Diversification potential of Alternative

Investments

 Higher Returns on Alternative Investments

 Alternative Investments as a Hedge against

Inflation

 New Exposures and Opportunities

Insolvency & Bankruptcy, 2016
 Why was IBC Initiated in India?
 How has IBC helped in debt recovery
 3 parties who can file for Insolvency

◦ Corporate debtor
◦ Financial Creditor
◦ Operational Creditor

Initiation of CIRP and appointment of the resolution

professional.
CASE IN POINT
 The Corporate debtor in our case has borrowed funds from the
Financial Creditors as short term loans to fund its long term research
project.
 Over a period of few years the corporate debtor was unable to handle

the interest burden and thus defaulted in making the payments. This
led to the initiation of Corporate Insolvency Resolution Process (CIRP)
by the Financial Creditors.
 The report further explains in detail about the Resolution Plan

submitted by the Resolution Applicant to NCLT. It also explains how

much amount has been sanctioned to each of the financial creditor and
operational creditor.
 This Case is an interesting one because out of 12000 cases filed for

insolvency only 68 cases have been approved for restructuring while

the remaining cases have ended up in liquidation. This case is about to
join the league of cases which has ended in restructuring of debt and
developing a turnaround strategy rather than liquidation.
Cause of default
 The company borrowed from Banks to finance their projects which
carried the problem of regular interest burden. These projects by
their nature have long gestation periods before they can become
good commercial propositions, if at all. There are high chances
that such projects may not yield any commercial return.
  
 The ideal situation for the company would have been to fund such
projects through research grants, if the projects are purely on
humanitarian basis or through patient venture capital
investments, if the outcome of the project can be monetised over
by investors having a longer time horizon and patient capital.
  
 But, the company chose to fund its long term projects with

little immediate revenue potential by way of bank loans.

Reason for project takeup
 Revamp of the hospital division
 Tie up with John hopkins medical clg
 Expansion of occupancy and increase profit

margin
 Find research grants for Medical project
 Extend lease agreements and continue

running the hospital divisions.

FUNDING PLAN
 First tranche funding 5cr
 Second tranche funding 30cr
 Third tranche funding 20cr
 Fourth tranche funding 20cr
Learnings from the case
 The Corporate Debtor had funded its ambitious
research projects through bank loans which seems
to be the major problem in their capital structure.
The corporate debtor must have funded its research
projects from research grants sponsored by
government or corporates.
 The credit analysis the corporate debtor before

sanctioning of the loan has been overestimated.

One of the main reasons for debts turning into Non
Performing Debts/Distressed Debt is the
overestimation of the credit worthiness of the
debtor.