Wilbur Ross Tries India

(page 2 of 2)

Browse Issues

Browse the BusinessWeek Archive

Story Tools

• post a comment
• e-mail this story
• print this story
• order a reprint
• suggest a story
• digg this
• save to del.icio.us

In the first quarter, SpiceJet reported a $23 million loss on revenue of $104 million.

DAMAGED GOODS

Ross moved quickly, closing the SpiceJet deal in three weeks. He got in on good terms, buying debt convertible to stock at a 20% discount from the level seen just before the sale, and a quarter the January price. Ross' investment, plus backing from Goldman Sachs (GS) and Dubai investment group Istithmar World Capital, has provided SpiceJet with enough cash to cover costs for the next 24 months, Ross says. The airline's CEO has been replaced, the advance-purchase half-price deal is over, and Ross and his India chief, Nabha, are looking to join the board. With SpiceJet, "Ross has a unique opportunity to prove that his credentials for turnaround investments are equally powerful in Asia," says Rajeev Gupta, managing director of private equity rival Carlyle Group's Indian operations.

In these economic times, Ross may find growing competition in India. As credit dries up in Europe and the U.S., private equity players "have really turned to emerging markets," says Paul Schnell, a partner in law firm Skadden, Arps, Slate, Meagher & Flom who advises private equity firms. Many investors try to boost their returns by piling on debt, which is difficult in India, where there's not much of a market in junk bonds and leveraged loans. For Ross, that may not be an issue, since he prefers to buy ultracheap assets and nurture them without taking on debt.

To help find the damaged goods he loves, Ross has hired a former official of an Indian company modeled on Resolution Trust Corp., which the U.S. set up to deal with failing thrift assets in the 1980s. India's version, Arcil, is working through billions of dollars in bad loans made by Indian banks in the '90s. In Febuary 2007, Ross became the first foreigner to buy a company—a textile maker—from Arcil. "There are many sick companies in India, and many industries with the potential for consolidation," says Deepak S. Parekh, chairman of HDFC, India's largest mortgage company and an adviser to Ross. "That means many opportunities for Wilbur."

Byrnes is a senior writer for BusinessWeek in New York. Lakshman covers India business for BusinessWeek.