KKR taps into asset reconstruction in India

The US buyout group will take control of an asset reconstruction company in India and expand its presence in the region.

KKR has become the first foreign investor to gain approval to own an asset reconstruction company in India having received the green light from the Reserve Bank of India.

KKR confirmed the report with Private Debt Investor, but declined to provide any comments on recent developments.

BV Krishnan, member at KKR and CEO of KKR India Financial Service (KIFS), said in a statement that “India continues to be an underserved financial services market, with shallow capital markets and an over-reliance on banks for wholesale financing”.

KIFS has completed $4 billion in financing for Indian companies over the last eight years, PDI previously reported. KIFS is registered with the Reserve Bank of India as a non-banking financial company.

KKR, which oversaw $153.3 billion of assets under management as of Q3 2017, also has a real estate-focused non-banking financial entity, with a focus on investing in property developers in India.

The private equity giant is expanding its presence in India amid favourable policies and legal codes for credit investments.

For instance, Arun Jaitley, Minister of Finance and Corporate Affairs in India, announced a $32 billion government recapitalisation plan for state-owned banks during a press conference held on October 24, 2017.

The government-led bank recapitalisation plans to clean up troubled assets from state banks’ balance sheets where small and mid-sized corporate loans are recorded.

In addition, the latest updates on insolvency and bankruptcy rules in India aim at providing better legal protections and rights to creditors and associated parties.

For instance, the Insolvency and Bankruptcy Code 2016 enables creditors to repossess the assets and also change the promoter if required, while the previous legal framework on bankruptcy, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 notes creditors can auction commercial and residential properties.

“If at all anything has changed, it [the Insolvency and Bankruptcy Code] has changed for the asset reconstruction companies which have aggregated the debt,” Siby Antony, chairman of the largest asset reconstruction company in India, Edelweiss ARC, said in an Economic Times interview in November 2017.

“In the banking system, consortia have not worked well. Banks need to decide what they want to do because they have a minimum window of six months or nine months for resolving [things],” he added.