Canada Pension Plan Investment Board (CPPIB), biggest pension fund manager in that country, is looking to re-enter the private debt market here.
In 2014, it had formed a joint venture (JV) with Piramal Enterprises to provide debt financing for real estate projects, which did not take off well.
The desire to enter the private debt space in India comes when there is an acute fund crunch in real estate and among non-banking financial companies, after last August’s defaults by the IL&FS group.
“The one area (in India) where we do not have exposure is private debt. Globally, we are a large player in private debt. We are in the process of exploring options as how to approach this particular asset class in the Indian market,” said Vikram Gandhi, senior advisor at CPPIB.
The Canadian entity manages $392 billion of assets globally. In India, it has invested $6.8 billion (Rs 14,150 crore) or two per cent of its assets in infrastructure, financial services, real estate and other areas.
On the JV with Piramal for debt financing, Gandhi said, “At that time, a lot of liquidity came into the market and brought down the returns. Hence, we decided not to go ahead with investments. We have a wonderful relation with them.”
Recently, the two announced a JV for an infrastructure investment trust focused on renewable energy. Gandhi said CPPIB would also to explore other opportunities with Piramal.
Global fund managers KKR, Brookfield and Blackstone and domestic ones such as Edelweiss and IIFL have given billions of dollars as private debt in this country. KKR disbursed Rs 8,173 crore of corporate loans and Rs 4,256 crore of real estate loans in 2018, almost double of what it did in 2017 in both segments.
And, in real estate financing, KKR disbursed about Rs 1,000 crore from January to March this year. That included a major deal with the Bengaluru-based Embassy group and the KB Kothari group. It also lent Rs 300 crore to Baby Memorial Hospital in Kozhikode in Kerala, said sources in the know.
In an interview this April, B V Krishnan, chief executive at KKR India Financial Services, said in both corporate finance and real estate finance, deal volume was going up, given the lack of alternative forms of long-term capital.
“So, working with good businesses and promoters in the corporate side, specific micro-markets, and identified developers in the real estate side, we can generate good opportunities in the market,” he had said.
KKR is currently raising a Rs 5,000 crore India-focused credit fund.
Its US counterpart, Blackstone, had disbursed about Rs 3,500 crore in the past year in both real estate and non-real estate private credit. In an interview last year, Blackstone chairman Stephen Schwarzman said the private equity firm had plenty of scope to expand in the private credit sector, since Indian banks had Rs 10.2 trillion ($142 billion) of bad loans, and shrunk their wholesale lending books.
Canada’s Brookfield, which runs an alternative investment fund (AIF) for credit, plans to ramp up its private debt business to $1 billion this year, said a source in the know. It has lent about $500 million (Rs 3,500 crore) to Indian corporates, mainly real estate developers, in the four years since it started the business.
CPPIB’s Gandhi does not think they have missed the bus in private debt. “We have a global business and have seen private debt opportunities that have come to us in the past three to four years. But, we have not found transactions which are interesting to us, if you compared risk/return profiles of the transactions compared to elsewhere in the world,” he said.
CPPIB’s global credit investments (CI) division provides debt financing solutions across the credit structure. That includes term loans, high-yield bonds, mezzanine lending, structured products and other solutions for borrowers in all sectors. The CI vertical is comprised of six investment groups: Americas Leveraged Finance, Americas Structured Credit and Financials, Asia-Pacific Credit, European Credit, Public Credit and Real Assets Credit.