KKR, one of the largest global investment firms, is looking to acquire a non-banking financial company (NBFC) in the country to bolster its lending business, said a source in the know. The investor, which has assets under management (AUM) of $149 billion globally, wants to disburse loan against properties, shares, structured loans and and lend across sectors, the source said. “It wants to buy a NBFC which has AUM of at least Rs 10,000 crore. Though it has two NBFCs at present, KKR wants to buy another NBFC so that it can scale up faster,” said the source. KKR has already sent feelers to bankers, sources said. When contacted, KKR declined to comment on the matter. If its plans go through, this will be the fourth non-banking financial company it will own. KKR has sector-agnostic NBFC called KKR India Financial Services, set up in 1995, and a real estate-focused NBFC called KKR India Asset Finance where Singapore’s sovereign wealth fund GIC is an investor. Its investee company Avendus Capital also has a NBFC. According to the source, KKR has lent over Rs 15,000 crore through its NBFCs and debt funds. Its US counterpart Blackstone is also looking to start lending to corporates and other entities, reports said early this year. According to a senior executive with a Mumbai-based NBFC, KKR can acquire only PE-backed NBFC as other promoter-led NBFCs are not up for sale now. KKR follows multi-format strategy to build its loan book.
In addition to NBFCs, it also has multiple alternative investment funds which provide loans. KKR also co-invests with institutional investors to give big-ticket loans. KKR, the source said, also wants to invest with other fund managers to invest in real estate projects. “If somebody wants Rs 500 crore, they can invest Rs 150 crore to Rs 200 crore,” the source said. “Current NBFC valuations are fairly rich for majority stake and to earn a fair return, one must have a long-term strategic outlook. Itis better to acquire loan books if the aim is to build asset base to achieve scale and size,” said Vimal Bhandary, former Chief executive officer at IndoStar Capital. KKR’s buyout plan comes at a time when NBFCs set up by Ajay Piramal, Edelweiss, L&T Finance, IIFL and others, are growing their businesses aggressively. According to sources, Piramal, Edelweiss and IIFL have loan books of Rs 25,000-30,000 crore. Some other finance companies backed by PE firms include IndoStar Capital Finance, promoted by Everstone Capital and Goldman Sachs; Capital First by Warburg Pincus; and Fullerton India owned by Singapore-Temasek Holdings. Head of financial services with an Indian Rating agency said while large credit demand across segments —SME, housing, personal loans — is prime driver for attracting investors, improved framework for asset recovery and resolution is giving them comfort on returns and viability. The investment interest by PE firms is coming in companies that give small-ticket loans and affordable housing in tier-II and-III cities.