Kotak targets $1.5b for second India special situations fund

Eshwar Karra, the firm's CEO, told Mergermarket, AVCJ's sister title, that a first close was targeted for September or October. He added that the investment focus will move to more growth-oriented structured credit solutions and away from the distressed- and one-time settlement-type of transactions that characterised Fund I.

"Growth seems to be the new mantra," said Karra. "That is where people are looking for capital, that is where huge opportunities are there, and that is where a lot of our competitors, such as wholesale NBFCs [non-banking financial companies] and some global credit funds, have either vacated the space or changed their strategy."

The shift in strategy comes because the pool of large, distressed situations in the country has largely already been resolved, and the return on time invested is now better on growth deals.

A plethora of domestic and global platforms are active in the Indian private credit space, from global funds to India-focused credit platforms launched by the likes of Baring Private Equity Asia to joint ventures such as Bain Capital's tie-up with Piramal Enterprises. Kotak wants to differentiate itself by pursuing large ticket deals of INR 5bn (USD 66m) and above.

Fund I, which closed in mid-2019, is 80% deployed across 12 investments. Just over 40% is in restructuring and turnaround, and the rest is in strategic situations, Karra said. The outstanding balance will go into growth-led opportunities.

Investments include Jindal Stainless Steel, cement maker Nuvoco, ATM and cash management solutions provider AGS Transact, a toll road project in Andhra Pradesh, commercial asset manager Prius Commercial Projects, property developer Prestige, float glass manufacturer Gold Plus, and TVS Supply Chain Solutions.

Fund I included a USD 500m anchor commitment from Abu Dhabi Investment Authority (ADIA). There were three other LPs: GIC, PremjiInvest and Kotak Bank. In addition, Kotak makes a commitment of at least 10% to all its funds.

To date, the fund has generated an IRR of more than 25%. "For us, the principal and the benchmark return have to be protected, but for the balance upside of 5-10% we take equity risk," said Karra.

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• Topics
• South Asia
• Fundraising
• Credit/Special Situations
• India
• Kotak Investment Advisors
• Distress
• Structured finance