Mumbai: Private credit and buyout transactions will form core of Kohlberg Kravis Roberts and Co.’s operations in India, the global private equity firm’s co-chairman and co-CEO Henry Kravis said. “We have every kind of capital a company could possibly need. We are much more in credit business than we’ve ever been; we have more capital than we have ever had," Kravis, who co-founded KKR, said in Mumbai on Wednesday.
“Well-meaning defaulting promoters want to settle and you can have discussions to give up control. Ability to get significant control in ownership to drive change is something we are keen on," he added.
“India is a terrific place to put capital and investing in infra, waste management, hospitals. We can invest around the world anywhere with the right capital structure.What we are good at is buying a company, improving operations tremendously, hold that for 5-10 years on average and we should just come out fine," Kravis said.
Kravis, one of the pioneers of global private equity, founded KKR in 1976 with Jerome Kohlberg Jr and George R. Roberts, and made it one of the world’s largest private equity enterprises, with more than $190 billion of assets under management.
He is of the opinion that while India needs to improve on several fronts that include removing regulatory bottlenecks and improving the ease of doing business, the country has done well with its pace of reforms in recent years, effectively transforming into an investment bright spot, viewed by investors across the globe with renewed optimism.
“You have a government that is pro-business, that is trying to do what needs to be done to improve business. As you go forward, you’re going to have a large amount of liquidity put into the system—it takes fiscal and it takes monetary. You’re the fastest growing economy in the world," Kravis told a select group of journalists.
“India has got areas, which need improvement. You have no significant bond market here and if you don’t have a long-term bond market, you limit growth. It is a provider of capital and when banks run out of capital, you suddenly strangle smaller and midsize companies," he said.
“I am a firm believer that a country should have a broad and deep capital market. Having said that, you’ve taken a very good step towards that by having a bankruptcy law. Hard to believe that India didn’t have one till recently. You have goods and services tax that has standardized taxes and it makes a big difference. You have real estate laws, which have changed a lot. These are very positive steps," he added.
On resolving the mountain of bad loans in India, Kravis called for measures such as bad banks along the lines of those created in the US in the aftermath of the 2008 financial crisis, and a stress test of Indian banks similar to what was done in Europe.
“Take the tough medicine and clean out the bad loans. Once you have done that—a good asset quality stress test—they tried in Europe and got it right the third time. I would encourage the government and banks here to do it. If you put good money after bad money, it never pays off.
You are just compounding the issue. You can always raise capital to replenish the equity base, and then can start lending again but right now, everything is just frozen," he added.