KKR more aggressive than peers with multi-asset strategy

Sees more debt and equity deals in power, steel and chemicals

In the past six months, investment firm KKR India sewed up three deals in private equity (Max Financial Services, Avendus Capital, and Emerald Media), four deals in corporate credit, including Metropolis, and three deals in real estate financing, including Mumbai-based developer Sunteck Realty.

It exited Alliance Tire Group when Yokohama Rubber bought it for $1.2 billion on Friday and made a partial exit from Dalmia Cement. KKR was also in news for bidding for Jaypee Cement. While it lost the bid but the bid made a lot of noise.

Is KKR getting aggressive in India? Sanjay Nayar, member and chief executive officer (CEO), KKR India, plays it down. "It's not that we are upping our risks. It's just that few things are coming together. Yes, we are trying to get in front on stressed assets. We have 3-4 platforms which have come together," he says.

A random comparison with other private equity firms shows KKR has been more active than others during the last six months: Blackstone did two deals, AION Capital made three deals in two companies while IDFC Alternatives and ICICI Venture did not make any investment, reveals data from VCCEdge.

KKR follows a multi-asset strategy in India, and has been busy putting these platforms at work - private equity (started in 2006), a non-banking financial company (NBFC) that offers corporate debt (started in 2010), a real estate NBFC that lends to developers (started in 2014) and a platform for special situations (stressed assets): KKR and former Bharti Group veteran Akhil Gupta recently acquired a majority stake in asset reconstruction company International Asset Reconstruction Company (IARC), which received a Foreign Investment Promotion Board (FIPB) nod this March.

"These platforms have come of age, and we are able to bid for deals ranging from stressed assets to real estate to corporate credit to private equity," says Nayar. No wonder, 2015 was more active for KKR than 2014 in terms of money deployed across the four pools - it made three PE deals, disbursed $750 million of corporate credit and $200 million to real estate developers.

"The four platforms have been around for 4-5 years, and have been completely built-out in terms of people, teams and capital," says the CEO of a PE firm who tracks KKR closely. With a pick-up in growth and consequent demand for capital, KKR's multi-asset model is starting to become more relevant.

"We are present with different pools of capital. The difference we are finding is that there's a renewed confidence and chance for entrepreneurs to bank on growth again. I am confident that growth will start to show up in the next few quarters with concerted effort in the Budget to start public spending," says Nayar.

"Indian businessmen are watchful, but I see some revival of confidence and hence a good pipeline of deals for us both in debt and equity. Banks are talking to us more constructively about deals like Jaypee Cement and they are discussing such assets in power, steel and chemicals," says Nayar.

"The year 2016 will be equally interesting; we will see more dialogue with banks on stressed assets, a lot more on the credit side," says a former banker who headed Citibank in India before joining KKR India in 2009.

Starting in 2006, KKR has invested around $1.7 billion in India across 11 private equity deals, extended structured financing of more than of $3.25 billion through its credit, NBFC and capital markets business, and invested around $200 million through its special situations business till March 2016.

But KKR has made just two exits till now - Bharti Infratel and Dalmia Cement - where it swapped its 15 per cent stake for Rs 600 crore and 8.5 per cent stake in listed Dalmia Bharat. "We are patient. Having chosen the right promoters, we feel good about the companies we deal with. We have all lost a couple of years because of lack of growth, but we see signs of revival and are quite excited," says Nayar.