MUMBAI: Kohlberg Kravis Roberts (KKR & Co) and Blackstone Group LP, two of the major private equity (PE) investors in India, are planning to increase their exposure in the country by changing their investment strategy. While Blackstone is doing a lot of real estate investments, KKR says it will focus more on investing in stressed corporates.
Following a series of dud investment deals, including Gokaldas and MCX, Blackstone recently made investments in the commercial real estate sector. On the other hand, KKR said it would invest more in stressed Indian companies that require immediate funding.
According to analysts, in recent times, structured finance deals have been quite common and the key reason is that the cost of equity has increased significantly, considering the unfavourable Indian macro situation. "From an investor's standpoint, they have some predictability of returns, which is a key factor considering so many of their investments made in 2006-08 have not made money, and they get some collateral as well. Accordingly, a number of funds now invest out of multiple vehicles - this trend is expected to continue at least in the near future and may be longer in sectors such as capital goods and operational infrastructure," says Sanjeev Krishnan, executive director and leader (private equity & transaction services) at Pricewaterhouse-Coopers, on changed investment strategy of funds such as KKR.
So far, KKR has invested $1.6 billion in India and its Indian finance company has invested a similar amount in Indian companies. Blac-kstone, on the other hand, has invested about $1.7 billion in the country with its recent investments mainly in the commercial real estate space (see chart).
KKR, led by former Citibank India CEO Sanjay Nayar, recently said stressed Indian firms are likely to get structured loans or equity from funds, including the KKR Special Situations Fund. "There are some very good firms and what's wrong with them is that their capital structure is impaired and we can help them out," said Henry Kravis, co-chairman and co-CEO of KKR, in Mumbai, on February 21.
While public sector banks stressed assets continue to rise mainly due to higher gross non-performing but the growth in restructured assets seems to be stabilizing, according latest data released by the finance ministry.
Stressed assets, which is total of gross NPA and restructured advances, was 12.61% of gross advances as on end December as compared to 11.02% in March end.
According to data compiled by the ministry, Mumbai-based Central Bank of India has the highest amount of stressed asset which stood at 19.75%, followed by two Kolkata-based lender, UCO Bank and United Bank of India. Punjab National Bank and Andhra Bank are the other two lenders that featured in the top five list of stressed assets.
Public sector banks gross NPAs have grown at a faster pace during the nine month period than the restructured advances with the entire sector gross NPA stood at 5.17per cent as compared to 3.84% in March. The pace of growth of recast loans was far more moderate which was at 7.44% as compared to 7.18%.
Yesterday, finance minister P Chidambaram said he expects bad loans to be higher this fiscal and termed NPA as the biggest challenge for government-owned banks. He was addressing the media after a meeting with state-run bank chief executives to review their performance.
The ministry's note also mentions three lenders that have seen fall in gross NPA over the last one year ended December 2013. These are, UCO Bank, Vijaya Bank and Bank of India. Three banks have been mentioned for having less than 3% gross NPA - Vijaya Bank, Canara Bank and Dena Bank.
In sector wise trend of Gross non-performing assets, the corporate sector has seen highest growth since March 2011, followed by farming and Small and medium size units segment. The real estate and retail sector exhibiting lowest stress.