Special Situations Funds (SSFs), which buy stressed assets and capitalise on turnaround-situations and special market events, are the flavour of the season, with several launches in recent months. These include funds from Motilal Oswal, InCred and Resurgent India. Such funds come under alternate investors (AIFs) under Securities and Exchanges Board of India (Sebi).
SSF
“We aim to systematically acquire, revive, and scale assets that hold potential but face temporary financial or operational distress. Our approach is strategic and patient,” said Jyoti Prakash Gadia, Managing Director at Resurgent India, which is raising Rs 500 crore in SSF.
Earlier, InCred launched an SSF with a target of Rs 1,000 crore and an option of another Rs 500 crore. Motilal Oswal Special Opportunities Fund opens on 25 July 2025.
SSFs have a minimum corpus requirement of Rs 100 crore, and are exempt from diversification limits. However, they can invest only in Indian firms.
Oaktree Capital’s bids for DHFL and Essar Steel in the insolvency market are notable examples, apart from Cerberus Capital’s bid for Rs 33,000 crore stressed loans from Yes Bank. Bain Capital, a US-based asset manager, is one of the largest special situations investors in the world. The firm which raised $5.7 billion in Global Special Situations Fund II, has made several investments in India.
The risk reward matrix in the AIF ecosystem is high and it caters sophisticated investors and institutional investors. SSFs require a minimum corpus of ₹100 crore and a mandatory three-year lock-in period on investments. RBI guidelines allow banks to sell stressed loans to SSFs directly. Foreign investors can also participate subject to regulations.
Active Indian SSF
SBI, Kotak, ICICI Prudential and Aditya Birla Sun Life are among the most active Indian SSF managers investing in mergers, acquisitions, restructuring, or distressed transitions. AIFs differ from mutual funds and PMS and are under various categories. Venture Capital (VC) funds, Angel Funds and Infrastructure Funds under category one, while Private Equity funds and Real Estate Funds are in category two and hedge funds under category three of AIFs.
“Our fund is designed to bridge professional management, sector-neutral investment strategies, and disciplined execution. This launch reflects our confidence in India’s evolving economic landscape and revival of stressed industries through targeted interventions,” said Sudhir Chandi, Director at Resurgent India.