Canada Pension Plan Investment Board (CPPIB) announced that it is entering a $525 million partnership with India’s Kotak Mahindra Group.
The pair will invest the capital into stressed assets in India under a separate mandate from Kotak’s existing distressed asset investment affiliate, Phoenix ARC which has been buying bad assets from Indian banks for over a decade.
Under the agreement, CPPIB will commit up to $450 million while Kotak will put up the remaining $75 million. It will focus on stressed opportunities across sectors and assets such as manufacturing loans and real estate debt.
The asset manager is targeting a return of over 20 percent, in rupee terms, with a typical deal size of $50 million. The partners will invest the cash over three years. CPPIB will provide capital as and when deals are sourced and closed. Kotak will take sole charge of the management and investment decisions.
“Given the magnitude of the stress in the system, the opportunity requires significantly higher levels of capital commitment. We have hence partnered with CPPIB to put patient capital to work, backed by strong and active asset management, to capitalize on the stressed assets market,” S. Sriniwasan, the chief executive officer of Kotak realty fund told PDI.
The major source of investments will be the sale of non-performing assets by government-controlled banks.
“This investment is an important step in CPPIB's strategy to build a diversified credit business and will add to our direct credit investment capabilities in India,” said Adam Vigna, managing director of principal credit investments in CPPIB. “We are pleased to have Kotak as our advisor, and this investment will serve as an excellent complement to our existing credit investment business in Asia. Through this agreement, CPPIB will selectively invest in assets that we believe will deliver value in line with our long-term investment mandate.”
Kotak Mahindra Group is one of India's leading financial services conglomerates. The alternate assets management business of the group has raised in aggregate $2.49 billion across different asset classes including private equity funds, real estate funds, infrastructure funds and the special situations credit fund. Overseas investors have partnered with Kotak before. Sovereign wealth fund Abu Dhabi Investment Authority committed $300 million to the firm’s real estate fund.
CPPIB already invests in Indian debt through its mezzanine real estate debt partnership with Piramal.
CPPIB is the investment manager for Canada Pension Plan. It invests in public equities, private equities, real estate, infrastructure and fixed income instruments. It has a total of C$282.6 billion ($212.5 billion, €191.3 billion) in assets under management.