INVESTOR SOLICITATION

The Insolvency and Bankruptcy Code (IBC) in India has revolutionized the framework for resolving distressed assets, creating an efficient market where previously there was fragmentation and uncertainty. At the heart of successful insolvency resolution lies the twin pillars of effective investor search and strategic asset marketing. These components are not merely administrative tasks but critical functions that directly impact the recoveries for creditors, the revival potential of distressed businesses, and the overall health of the financial ecosystem. When executed effectively, they transform distressed assets from liabilities into valuable opportunities, benefiting all stakeholders involved.

The IBC creates a structured approach to both investor search and asset marketing, providing a comprehensive legal framework that enhances transparency, accessibility, and value realization in the resolution process.

The Information Memorandum (IM) serves as the foundational document in the Corporate Insolvency Resolution Process (CIRP), providing potential investors with detailed insights into the distressed entity. Under Section 29 of the IBC, the Resolution Professional is mandated to prepare an IM containing comprehensive information about the corporate debtor[4][9]. This critical document must be submitted to the Committee of Creditors within two weeks of the Resolution Professional's appointment or within fifty-four days of the insolvency commencement date, whichever is earlier[4].

The IM must include detailed information such as:

1. Assets and liabilities with descriptions necessary for valuation
2. Latest annual financial statements
3. Audited financial statements for the previous two years
4. List of creditors with admitted claims and security interests
5. Particulars of debt related to related parties
6. Details of guarantees provided
7. Information on material litigation and ongoing investigations
8. Employee information and liabilities[4][9]

This comprehensive document enables potential investors to make informed decisions about participating in the resolution process, thereby expanding the pool of prospective resolution applicants and enhancing competition in bidding.

The Expression of Interest (EOI) represents the formal entry point for potential investors into the resolution process. Resolution Professionals invite EOIs through public advertisements, establishing eligibility criteria and submission guidelines[3]. Interested parties must submit their EOI along with supporting documents demonstrating their eligibility, financial capacity, and commitment to confidentiality[3][21].

The EOI process typically includes:

1. Submission of the formal EOI on company letterhead
2. Declaration of eligibility under Section 29A of the IBC
3. Financial information demonstrating capacity to invest
4. Confidentiality undertakings
5. Authorization documentation for designated representatives[3][21]

This structured approach to investor identification ensures that only qualified and genuinely interested parties proceed to the next stages of the resolution process, improving overall efficiency.

The IBC regulatory framework explicitly recognizes the importance of marketing distressed assets through Regulation 36C of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016[11][14]. This regulation requires Resolution Professionals to develop a comprehensive strategy for marketing the assets of the corporate debtor in consultation with the Committee of Creditors. For companies with assets exceeding ₹100 crore as per the last available financial statements, this marketing strategy is mandatory[11][14].

The regulation specifies that:

1. The resolution professional shall prepare a strategy for marketing the assets of the corporate debtor in consultation with the committee
2. Implementation of the strategy and its associated costs require committee approval
3. Committee members may also independently undertake measures for marketing the corporate debtor's assets[11][14]

This regulatory requirement recognizes that successful asset marketing is not incidental but integral to maximizing value realization.

The most recent advancement in asset marketing during insolvency is the introduction of centralized electronic platforms for conducting auctions of stressed assets. In October 2024, the Insolvency and Bankruptcy Board of India (IBBI) mandated that auction processes for stressed assets under the insolvency law must be conducted through centralized electronic platforms[5].

IBBI has collaborated with the Indian Banks' Association to facilitate asset auctions through the “eBKray platform,” owned and managed by PSB Alliance Private Limited (a consortium of 12 public sector banks)[5]. This centralized approach addresses several critical challenges in asset marketing:

1. Information Asymmetry: Previously, details of a company's assets were typically made public only at the time of auction notice, giving potential buyers limited time to assess value. The centralized platform ensures asset information is continuously available to the public[5].
2. Enhanced Transparency: The platform requires liquidators to list all assets mentioned in the Asset Memorandum, including comprehensive details such as attachment status, geographical coordinates, and likely auction dates[5].
3. Wider Bidder Access: By centralizing listings, the platform expands the potential pool of bidders, driving competitive pricing and higher recoveries[5].
4. Rich Asset Information: The platform provides detailed information including photographs, videos, and geographical coordinates of assets, allowing for more thorough evaluation[5].

This transition to centralized platforms represents a significant evolution in asset marketing during insolvency, addressing historical challenges of fragmentation and information disparity.

Effective asset marketing during insolvency extends beyond regulatory compliance to strategic implementation that maximizes value realization. The IBC framework has fostered innovative approaches to presenting and marketing distressed assets.

The IBC has been instrumental in developing a formal market for distressed assets in India. Before the IBC, distressed asset sales were largely informal and fragmented, with limited participation from institutional investors[2]. The Code's clear procedures and fixed timelines have enhanced the liquidity of distressed assets and expanded participation in this market[2].

The IBC framework has also led to the emergence of specialized participants such as Asset Reconstruction Companies (ARCs) as key players in the distressed asset market. ARCs specialize in acquiring, restructuring, and profitably selling distressed assets[2]. Their expertise in turning around distressed businesses adds significant value to the resolution ecosystem.

The streamlining of ECB (External Commercial Borrowing) regulations has significantly enhanced foreign participation in India's distressed asset market. By relaxing restrictions on external borrowings, the RBI has enabled foreign investors to participate more actively in acquiring distressed assets under the IBC[20].

Key reforms include: 1. Simplification of the four-track structure for ECBs into just two tracks 2. Implementation of a uniform cap of $750 million for borrowers 3. Reduction of minimum maturity for ECBs beyond $50 million from five to three years[20]

These reforms have drawn significant attention from global private equity players looking to tie up with local companies to bid for stressed assets or set up country-focused special situation funds[20].

Beyond regulatory requirements, successful insolvency resolution demands strategic investor engagement to build relationships, foster trust, and maximize participation in the resolution process.

Effective investor engagement builds trust between the Resolution Professional, the Committee of Creditors, and potential investors. Regular communication and transparent reporting are essential for establishing credibility with stakeholders[6]. This trust encourages broader participation in the resolution process and often leads to better outcomes for all parties involved.

Technology plays a crucial role in modern investor engagement strategies. Resolution Professionals can utilize multiple channels to reach and engage potential investors:

1. Dedicated Investor Websites: Providing centralized access to information about the corporate debtor, including financial results and ESG metrics[6].
2. Email Communications: Maintaining updated subscriber lists to distribute important announcements directly to interested investors[6].
3. Social Media Platforms: Engaging investors in real-time through platforms like LinkedIn[6].
4. Video Interviews: Allowing key stakeholders to communicate directly with investors in a more personal manner[6].
5. Webcasts: Enabling broader access to information about the corporate debtor, with interactive features allowing for immediate feedback[6].

These technological tools significantly enhance the efficiency and effectiveness of investor communication during the resolution process.

Effective investor search and asset marketing have catalyzed the development of a robust market for distressed assets in India, bringing numerous macroeconomic benefits.

A well-functioning distressed asset market delivers significant economic advantages:

1. Reduced Debt Collection Burden: A secondary market for NPAs reduces the debt collection burden on banks and frees up resources and capital to support new lending[7].
2. Enhanced Risk Management: It provides banks with additional instruments to manage credit and market risks[7].
3. Support for Corporate Restructuring: The market expands financing sources and improves secondary market liquidity for loans[7].
4. Faster Economic Recovery: In the near term, a distressed asset market facilitates the exit of non-viable firms and supports the growth of viable ones[7].
5. Resource Reallocation: Over time, it enables the reallocation of resources toward more productive corporations and assists in their reorganization and expansion[7].

The IBC's role in developing this market has been transformative, providing a legal structure with well-defined processes, responsibilities, and timelines that have attracted sophisticated investors previously deterred by regulatory uncertainty[7].

Several recent initiatives have accelerated the development of India's distressed asset market:

1. National Asset Reconstruction Company Limited (NARCL): Established to aggregate and consolidate stressed assets of banks worth ₹2 lakh crore in phases[7].
2. India Debt Resolution Company Ltd.: Created to resolve distressed assets as going concerns or liquidate them efficiently[7].
3. Pre-packaged Insolvency Resolution Framework: Introduced to provide a simplified mechanism for resolving stressed MSMEs[7].
4. Electronic Platforms for Distressed Assets: Platforms launched by NeSL and Mjunction offering market for interim finance, virtual data rooms, invitation and evaluation of resolution plans, and auctions during liquidation[7].

These initiatives collectively enhance the efficiency of distressed asset resolution, stemming value erosion during the process.

The importance of strategic investor search and effective asset marketing in the insolvency resolution process cannot be overstated. They serve as the twin engines that drive value maximization, creditor recovery, and economic renewal. The IBC's structured approach to these processes has transformed India's distressed asset landscape from an informal, fragmented market to a sophisticated ecosystem with specialized participants and established protocols.

The continued evolution of regulatory frameworks, technological platforms, and market practices in investor search and asset marketing will further enhance the efficiency of insolvency resolution. For stakeholders across the spectrum-from creditors seeking maximum recovery to investors hunting for value opportunities, and from regulators aiming for financial stability to employees hoping for business revival-these processes represent the critical bridge between distress and resolution.

As India continues its journey toward becoming a $5 trillion economy, the systematic efforts to release investments locked in stressed assets through effective investor search and asset marketing will remain pivotal to achieving sustainable economic growth.