“There will always be critics. India is on track to be a $5-trillion economy and, for that, we need new and innovative avenues of credit supply that cannot be sufficed by a few public and private banks alone,” says KKR India CEO Sanjay Nayar.

KKR has been one of the largest investors in India this year and remains upbeat. KKR India CEO Sanjay Nayar tells TOI that the global investment firm is ready with large pools of capital and is eyeing consolidation opportunities in a fragmented market:

In the last few months, you have invested around $3 billion, with the two Reliance deals linked to the digital space. What’s your strategy for the future?
Both deals were offshoots of growth capital required by these companies with a big play on digitisation, data, and consumption. Those are the two three themes we love, especially in a massive consumer market like India. JB Chemicals was a good pharma business, and we think we can make it better with the help of the new management. In general, in private equity and infrastructure business, the idea is to do a few bolt-ons to make the companies larger and better. The infrastructure sector is one where a lot of capital will flow in the country in both equity and debt. There is a massive opportunity for consolidation, and even the government is targeting asset monetisation.

This sector has traditionally been very fragmented, so we and some of our peers could be big consolidators in the future. We have IndiGrid (an InvIT), Virescent (the platform for renewable energy assets) and then we have the two NBFCs — one for corporate credits and the other for real estate. In private equity, apart from the two big Reliance investments, we have five control situations — JB Chemicals, Max Hospitals, Ramky Enviro, Avendus, and Eurokids.


What is the plan for the NBFC, KKR India Financial Services (KIFS), since some assets took a hit and a merger was being pursued?
KIFS faced a few troubled credit situations in last 18 months, but we were proactive in taking measures, learning our lessons, and moving on. KIFS is exploring M&A because a standalone wholesale NBFC, post-IL&FS crisis, does not make economic sense. The book needs to be more diversified, so one needs to do something with a retail NBFC, and that KIFS is exploring.


How did Covid impact your investments, and what opportunities do you see?
The first priority was safety, given that we have frontline companies in hospitals, healthcare, education, and waste management. Then was liquidity, but generally, the banks have been very helpful. Once we phased through three-four months of the pandemic, our companies looked at whether there are opportunities to transform themselves into the new reality (digitisation), raise capital given the market situation was attractive, and do more bolt-on acquisitions. Now, our companies are working to see how we can capitalise on growth. KKR has also been focusing on transmission and renewable assets on the infrastructure side, standalone hospitals, and schools. For instance, KKR recently signed-up a school in Bangalore, and we are in the process of consolidating a few more schools with Eurokids. Given how times have changed, quite a few SME companies would like to become a part of larger corporates. Therefore, we are quite focused on bolt-ons so that our company can get to a larger scale.


You were among the people consulted by the RBI panel, and there is a lot of controversy over the proposal to allow corporate houses to set up banks…
There will always be critics. India is on track to be a $5-trillion economy and, for that, we need new and innovative avenues of credit supply that cannot be sufficed by a few public and private banks alone. Some of the NBFCs have become very large with differentiated risk management and are doing a pretty good job. They should be allowed to convert to banks if they want to. The question then is if some of them are owned by corporate houses, how does one view that? The IWG report emphas is that a non-operating financial holding company (NOFHC) is a preferred holding company route for these banks and will help separate the other businesses from the lending business. This is not the same as a corporate house getting into lending, it is just a conglomerate which happens to have a big financing business wanting to become a bank. They should be allowed if they fulfil the fit and proper criteria.


Source: The Economic Times

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