KKR and Co., which invests in private high-yield debt in India, will infuse ₹100 crore into its asset reconstruction company (ARC) by 31 March, two people directly aware of KKR’s funding plans said, requesting anonymity. It will help KKR meet the minimum net-owned corpus requirements for ARCs under the Reserve Bank of India regulations, they added.
KKR has been one of the early funds to start developing private high-yield and structured credit investing in India. It operates through a non-banking financial company and alternative investment funds, and has executed over 140 transactions in India, valued at close to $6 billion.
Notably, this is the second time KKR has been given a license to start an ARC in India by the RBI. In December, 2017, the PE firm became the first foreign investor to get a licence for an ARC in India. The licence subsequently lapsed after it failed to capitalize the company within the prescribed time limit. KKR applied for a fresh licence in October last year and received the RBI’s approval earlier this year.
“ARC is one of vehicles we will have in place as we pursue the distressed strategy. We could not go ahead earlier due to a change in our status to corporate globally and we do plan to reapply from a different entity," a KKR spokesperson said in response to a query.
“KKR is putting a specialised team in place to manage the business," said the first person cited above.
Globally, KKR’s lending business has over $62.8 billion in assets under management. It is among the few foreign private equity firms that has its own non-banking finance operations in India. It has invested around $2.5 billion in the country in 2018, including about $920 million in private equity transactions.
With the launch of its ARC business, KKR will join global peers such as Blackstone and Apollo Global management and Canadian pension fund, Caisse de dépôt et placement du Québec, which have also invested in ARCs in India to tap the full spectrum of India’s ₹10 trillion bad debt problem.
To tackle burgeoning bad debts, the government and the RBI have implemented a series of measures, including mandatory reporting of loan defaulters for bankruptcy proceedings, after 180 days of turning a non-performing asset (NPA).
In India, KKR manages multiple alternative asset classes, including private equity, energy, infrastructure, real estate and credit, with strategic partners who manage hedge funds. KKR’s Indian private equity portfolio includes investment bank Avendus Capital, Bharti Airtel’s tower unit Bharti Infratel, and Radiant Life Care. Radiant Life had recently acquired Max Healthcare Institute Ltd, making the combined entity India’s third-largest hospital chain by revenue.
In January, KKR appointed banking veteran and former Axis Bank managing director and chief executive officer Shikha Sharma as an adviser for its alternative credit business.
Sharma, KKR said, was brought in to advise its corporate and real estate-focused NBFCs in India and will focus on business growth, value-creation opportunities, and strategic mergers and acquisitions, among others. KKR’s alternative credit businesses in India currently have a combined net worth of approximately ₹4,640 crore.