How India's Bankruptcy Law Redo May Spur M&A Heyday

Flexing newfound muscle they gained in a 2016 bankruptcy law, lenders in India are about to embark on a huge selloff of assets owned by companies that can’t repay their debts. The assets -- owned by steel, power, shipbuilding and construction companies -- have been drawing interest from potential buyers including ArcelorMittal, the world’s biggest steelmaker, and billionaire Anil Agarwal’s resources giant. This prospective wave of deal-making could push mergers and acquisitions in India beyond the previous annual record of $83 billion, set in 2017.

In this first round of deals, lenders are seeking to resolve about 40 of the largest delinquent accounts with total outstanding debt of more than 4 trillion rupees ($63 billion) within one year. For Prime Minister Narendra Modi, getting rid of the bad loans is crucial to reviving Asia’s third-largest economy and meeting his election pledge of adding jobs before his party seeks re-election in 2019. His government’s separate plan to inject 2.1 trillion rupees into state-owned banks should give the lenders sufficient capital to write off bad loans weighing down their balance sheets.