Mumbai: Dubai-based investor Abraaj Group has begun looking at potential opportunities in the structured credit space in India, having focused thus far on private equity deals, two people familiar with the development said.
The firm, which manages assets worth $10 billion globally, is evaluating several potential structured credit deals in India including a potential investment in a Pune-based LED lighting products maker, the two said on condition of anonymity. Structured products include corporate loans and bonds.
“The company is looking to raise around Rs200 crore in debt to fund its working capital needs and talks are in a fairly advanced stage,” said one of the two. Queries sent to Abraaj Group remained unanswered as of press time.
The two people cited above said that Abraaj, which invests in select global markets in private equity and real estate deals, initially plans to fund transactions in India through the foreign portfolio investment (FPI) route that typically entails subscribing to debt instruments with an equity upside. Founded in 2002, Abraaj’s private equity investment strategy has been to acquire controlling or significant interests with board representation in investee companies.
Abraaj also follows a “buy and build” strategy of investing in scalable businesses, then exiting through sale to strategic and trade buyers or onto public markets in the region and beyond, within a three to five-year investment horizon.
In India, Abraaj has made seven investments till date which includes listed as well as unlisted companies dating back to 2006. Its recent investments include a majority stake purchase in Hyderabad-based hospital chain Quality Care India Ltd from global private equity firm Advent International in January last year for an estimated Rs1,700 crore. Last year, Abraaj also led a $150 million funding round in online grocery BigBasket. The funding round, also saw participation by other investors such as venture capital firm Sands Capital Management Llc and International Finance Corp. (IFC), the private sector lending arm of the World Bank. In January Mint reported that Abraaj is in advanced discussions to buy a controlling stake in south India’s leading diagnostics services provider Medall Healthcare Pvt. Ltd at an enterprise value of Rs1,500 crore.
“Many PE funds are realising that investment opportunities in late-stage high growth companies in India are rather limited; as such, many of them are turning to structured credit deals for better risk-adjusted returns” said Nachiket Naik, managing director at IREP Credit Capital. Large global PE funds that have recently entered the structured credit market in India recently include Baring Private Equity Asia (BPEA), Blackstone Group, Apollo Global Management and Lone Star Funds among others.
BPEA is raising a Rs500 crore domestic credit fund under the Alternative Investment Funds (AIF) category; Blackstone is evaluating structured credit opportunities in India from its offshore, Asia-focussed credit funds.