KKR India Asset Finance, the real estate-focused non-banking finance company (NBFC) of global investor KKR, is aiming to raise $600 million through debt to bolster its lending business and secure an asset base of $800 million in a year, said a source.
The move will stand the company in good stead to compete with players such as Piramal Finance and NBFCs such as L&T Finance that are active in lending to property developers, the source said.
Singapore government-owned GIC is one of the main investors in KKR India Asset Finance, which has a loan book of $400 million. “They have equity of $300 million and can leverage two times the amount,” the source said. KKR declined to comment for the story. It invested $500 million last year and intends to scale up further in Indian real estate, the source added.
Its other major investments were Rs 4.5 billion in Lodha Group, Rs 3.15 billion in Runwal group, Rs 5 billion in Bhartiya City Developers and Rs 2 billion in Signature Global’s affordable housing project in Gurugram. “This year, we have focused on affordable housing projects (in addition to other segments) in sync with our long-term, sustainable investment strategy and overall demand for capital in the space. We have started focusing more on financing construction activities that enables us to meet capital needs of the sector,” Sanjay Nayar, chief executive officer, KKR India, had said last year.
Ajay Jain, joint managing director at Sun Capital Advisory, said in an environment when banks were averse to direct funding in real estate, NBFCs had a good opportunity to support such transactions at 13 to 18 per cent, considering the security the sector offers. “KKR, as far as I understand based, has a good asset base and can have better share among other NBFCs in the sector. It is a good time to scale up assets under management (AUM) in real estate,” he said. KKR's decision was apparently influenced by the fact that Piramal had loaned Rs 50 billion in the past 15 months through lease rental discounting (LRD), where developers discount their future rent receivables. The company plans to double its lending through LRD by March 2019.
Piramal Finance had an AUM of about Rs 650 billion as of December 2017. Piramal has also set up a housing finance company and assets of Rs 6 billion. By 2020, Piramal Enterprises, parent of Piramal Finance, expects the book for home loans to reach Rs 150 billion. Piramal plans to lend to non-real estate borrowers, on a sector agnostic basis, through its corporate finance group for loans of Rs 1 billion.