Kotak reaches first close on second India special situations fund
Kotak Investment Advisors has reached a first close of USD 1.25bn on its second India-focused special situations fund against an overall target of USD 1.6bn.
Sovereign wealth funds and pension plans that invested in Fund I have re-upped for the second vintage, the firm said in a statement.
Abu Dhabi Investment Authority (ADIA) contributed USD 500m to Fund I as an investor. The vehicle closed on USD 1bn in 2019, with additional commitments coming from a second sovereign wealth fund, an Indian family office, and Kotak Mahindra Group, the manager’s parent.
Fund I was raised amid a distressed investment boom in India, with the likes of Värde Partners, Apollo Global Management, Brookfield Asset Management, and J.C. Flowers all entering the space through partnerships with local specialists.
Bullishness was underpinned by expectations of increasing non-performing loan (NPL) deal flow from the country’s banking system and opportunities arising from the introduction of a new bankruptcy code. In addition to bankruptcy restructuring, investors targeted structured credit transactions involving stressed companies.
Fund II retains some of the characteristics of its predecessor – a sector-agnostic approach, an ability to invest in equity, debt, and hybrid instruments – but the environment has changed. Eshwar Karra, CEO of the special situations unit, noted that the fund is positioned “to finance the impending capex growth cycle that we expect to play out over the next couple of years.”
Rahul Chhaparwal, an executive director in the unit, added: “Global capital availability and the return parameters that meet a relative value proposition for India has changed in the last six months. Domestic capital availability will also recalibrate based on the latest budget announcements. This fundraise has come at an appropriate time to serve corporate India with a unique positioning.”
Kotak Strategic Situations Fund II is domiciled in Gujarat International Finance Tec-City (GIFT City), which is intended to bring offshore fundraising onshore. Private equity managers can raise US dollar vehicles and receive tax benefits if they establish local substance.
Kotak Investment Advisors is an alternate assets business within Kotak Mahindra Bank. It has raised more than USD 8.7bn since its establishment in 2005, with USD 3.6bn coming in the past 12 months alone. There are independent investment teams and funds for each asset class, including private equity, real estate, infrastructure, special situations, and listed strategies.
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