The Covid-19 induced lockdown has stretched the valuations of infrastructure assets with potential investors, suitors and funds treading cautiously seeking to gain more out of the slowdown in the economy.

While there may not be a significant impact on road sector assets when one factors the long-term value of the asset, there is the likelihood of a significant impact on the sale of power sector assets, particularly thermal power, as there is a growing shift towards renewable energy. The investments are also likely to flow more towards sale of assets in the renewable sector, according to experts tracking the sector.

Putting things in the current context of the economy seeking to emerge from the Covid-19 lockdown, Venkataraman Renganathan, Managing Director, Alvarez & Marsal, told BusinessLine: “The Covid 19 lockdown and the associated impact on economy has given an opportunity to corporates and funds to take a pause and relook at their acquisition strategy. Some of the deals that were on the verge of closure have also been put on hold. The setback on account of this lockdown on infrastructure asset classes like power and roads will be less compared to industries like hospitality, retail, entertainment etc and the authorities, including banks, have extended benefits to relieve the pressure on these asset operators.”

Representing a major consultancy firm that specialises in turning around companies, and also as a firm that was engaged with the Lehman Brothers, he added: “However, this gives a window for corporates and funds to squeeze down the valuations, look at alternate asset classes and prioritise deployment of funds.”

Significantly, companies and funds that have set apart resources for acquisitions are now having a relook at various options, including the ones they were seriously following of late.

Even with regard to the assets under consideration by the Insolvency and Bankruptcy Code, assets fit for sale and operating assets might attract interest from buyers. But even in these, the buyers may want to squeeze out a little more.

For instance, thermal power assets that are operational may be attractive to some, but the recent reconsideration of an almost-done deal is an example of how buyers are re-looking at these assets.

And in the case of pure play construction companies, there is hardly any interest as they are asset less so no one seems interested.

In the case of the IBC, the primary objective is to resolve the insolvency and revive the sinking entity and possibly save the business and jobs. Everything in the system looks quite stressful. The Code envisages a two-phase resolution under the Corporate Insolvency Resolution Process — the resolution phase and the liquidation phase.

Several cases of insolvency failed to get resolved in the resolution phase. So, if the asset does not get resolved during the resolution phase, it is also unlikely to get a finality during the liquidation phase.