While some creditors want to shed their unpaid receivables, others have turned them into a business: buying debt at a discount is one of the most rewarding alternative investments when done carefully.
The business model
It is straightforward: buy a receivable for a percentage of its face value, say 40%, and recover a larger amount by negotiating a settlement, enforcing through the courts or DRT, or waiting for the debtor's finances to improve. The gap between what you paid and what you collect, minus costs, is your return.
Example: you buy a ₹15,00,000 decree-backed debt for ₹6,00,000. If you recover ₹12,00,000 through execution, the gross return is 100% on capital invested.
Who buys debt in India?
From asset reconstruction companies and funds acquiring bank portfolios, to law firms buying individual receivables to enforce with their own teams, plus specialised small investors. You need not be a fund: many deals sit in the range of ₹2,00,000 to ₹50,00,000.
The 4 keys to valuing a deal
- The debtor's real solvency: check MCA status, assets and charges before offering.
- Documentary quality: insist on invoices, contracts or the decree before signing.
- Litigation status: is there a decree, a DRT certificate or an admitted IBC case?
- Limitation: confirm the 3-year period under the Limitation Act, 1963, and any acknowledgement that resets it.
Risks to keep in mind
The obvious one is not recovering your investment if the debtor is insolvent. Add legal costs if you litigate, long recovery timescales and the need for legal know-how. Diversifying across several smaller deals reduces the risk.
The IBC framework, useful for pricing distressed corporate debt, is published by the Ministry of Corporate Affairs.
How Debtalia helps
Debtalia is a marketplace that connects buyers directly with sellers. Deals are listed anonymously with the ₹ amount, price, debt type, region and documentation, and contact is direct and free, with no commission taken from the sale.
