KKR, GIC launch real estate-focused India NBFC

The first NBFC, KKR India Financial Services, launched in 2009 and has extended more than $2 billion in structured financing to 21 business groups. The locally-incorporated vehicle allows the provision of rupee-denominated funding to companies - across a variety of sectors - that might not be able to source capital through conventional banking channels and not want to give up equity to investors.

The real estate NBFC will fulfill a similar function. Over the past year developers have struggled with a slowing market and reduced cash flows, while obtaining bank financing can be a challenge, particularly for unfinished projects. There are already lenders that provide and debt and equity to the sector, but KKR believes there is a gap in the market for "solution-oriented, non-dilutive capital."

During 2014, KKR structured and participated in three real estate transactions with an aggregate value of around $190 million. The new NBFC targets commercial and residential projects. It is worth noting that many of India's generalist NBFCs are prolific lenders to the real estate sector. 

"This sector-focused NBFC further enables KKR to provide tailored financing solutions to companies, and adds to our established private equity and lending businesses in India," said Sanjay Nayar, KKR's India CEO, in a statement. "We aim to provide companies with value beyond capital alone in a way that is best suited to their needs. This real estate NBFC is our newest platform to achieve our goal in supporting good management teams to help their companies grow."

Plans for a KKR-GIC real estate-focused NBFC were first reported in 2013. Around the same time, it emerged that KKR was in talks with overseas groups - specifically investors with a long-term focus - to infuse more capital into KKR India Financial Services in order to scale up the business.

A variety of private equity investors have backed existing NBFCs and a few have set up new entities. For example, the year after KKR founded its NBFC, Everstone Capital launched what became IndoStar Capital Finance, a start-up also backed by several of its LPs.

Towards the end of last year, the International Finance Corporation (IFC) announced that it would commit capital to Fullerton India Credit Company, a NBFC owned by Temasek Holdings, and a similar entity formed by distress-focused GP Clearwater Capital Partners. IFC also has stakes in several other existing NBFCs.

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• Topics
• Real estate
• Real estate
• South Asia
• Expansion
• Real estate
• India
• KKR
• GIC Private
• NBFCs