Though the number of deals are few and far between in the distressed assets space in India, it remains one of the most attractive opportunities in India, said Sanjay Nayar, member and chief executive officer, KKR India, speaking at the Mint’s Annual Mint Private Equity Conclave 2017.
“In the distressed assets market, not too many or a real deal has happened so far… It is also very difficult for government banks to take a hit,” Nayar said.
Indian banks are sitting on a bad loan pile of at least Rs6.8 trillion and while a lot of private equity firms have expressed interest in the stressed assets sector, there haven’t been too many deals because of valuation issues and the reluctance of lenders to take a haircut.
While praising the government for its efforts to improve the macroeconomic situation in the country by introducing reforms, Nayar said that big capital gaps are being addressed and despite all the challenges, India is still one of the biggest opportunities and can still invite a lot of capital today.
“Distressed (assets) is a very good opportunity at present,” he said, adding that there has to be a tripartite agreement with the government, the way countries like Italy have done in the past.
Improved market sentiment and the passing of the new bankruptcy code are among the key factors that have encouraged foreign and domestic fund managers to bet big on the growing investment opportunity in the private credit space, especially in distressed assets in India, industry experts told Mint earlier.
Talking about the role of private equity industry in India at present, Nayar said that the PE landscape has changed over the past few years and has matured a bit, which is a big change.
“Private equity is being accepted by the government and companies as a form of capital that can have a lot more value and it is a good sign for the industry,” said Nayar.
“For PE industry, there is no better time than this to be in this market. One needs to go out and figure out the opportunity... We are not a very deep capital market. You don’t have to chase every deal n the market, you have to be thematic,” he said.
He added that it was okay for PE funds to wait for the bankers to bring the deals on the table.
“PE team has to be very focused, flexible and creative and try to figure out what all are the opportunities they can be created. Our team (PE industry in general) has to be proactive and focused… Large conglomerates are looking for capital efficiency,” he added.
Nayar also noted that the there is a need to depend upon different kinds of capital, and that the opportunity for investing in the current scenario in India for stable returns is massive.
Nayar, however, added that exits are not going to be easy in near future.
KKR has been an active investor in India. The buyout firm is upbeat on India and sees a big potential in private credit in the region. It has invested close to $3.5 billion through structured financing in about 62 firms in India, including GMR Holdings Pvt. Ltd, Avantha Group and Apollo Hospitals Enterprise Ltd.
KKR is also in the process of raising its second credit fund worth Rs1,500 crore. It has invested about $1.4 billion in India through its private equity vehicle. The company is also setting up an asset reconstruction company, or ARC, to acquire debt-ridden companies and assets.