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February 19, 2007

Why JP Morgan's distressed asset fund is in India

Economic Times has an interview with Sanjai Vohra is the managing director for JP Morgan Chase’s Asia special situations group.

Why is there a sudden interest in the NPL space? Does it have anything to do with the ongoing real estate boom?
I don’t think so, because NPLs should be viewed as a different asset class. They offer investors a different risk-return spectrum and not everyone can conduct this business. Specialised skill sets are required to manage an NPL portfolio.

More than underlying asset play, which is basically an effort to generate returns through foreclosures, the current buoyancy is a function of the changed regulatory environment.

Today, with the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFESI) Act and the Asset Reconstruction Companies (ARC) Act, things are better and businesses are simplified to a great extent.

Moreover, banks are recognising that with strong credit growth, it probably makes more sense to leave NPLs to the specialists and focus on the business of making advances. In other words, banks are playing to their strengths.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.