Abu Dhabi sovereign wealth fund picks up stake in KKR India NBFC
Photo Credit: Shah Junaid/VCCircle

Private equity firm KKR said on Monday Abu Dhabi Investment Authority (ADIA) has bought a stake in KKR India Financial Services Pvt. Ltd, one of its two non-banking financial companies in India.

KKR didn’t disclose any financial details of the transaction, saying only that the sovereign wealth fund of Abu Dhabi has become “a significant minority shareholder” in the NBFC.

The stake sale is in line with the private equity giant’s strategy to harvest its India investments. The PE firm has offloaded its stake in a half-dozen companies over the past year or so. These include exits from Alliance Tire Group, Gland Pharma Ltd, TVS Logistics and, just last week, Aricent Inc.

“ADIA’s investment… gives us a high-caliber partner to work alongside as we further scale our platform and deliver creative solutions in the market,” BV Krishnan, member at KKR and CEO of KKR India Financial, said in a statement.

KKR India Financial, set up in 2009, was the PE firm’s first NBFC in the country. It was also the first time a large PE investor had established an NBFC in India. the NBFC lends to companies across sectors, excluding real estate, and has sharpened its focus on mid-market firms in recent years. It has extended about $4 billion of financing to companies since inception.

In 2015, KKR floated a second NBFC, KKR India Asset Finance Pvt. Ltd, to lend to the real estate sector. The same year, this NBFC received investment from Singapore sovereign wealth fund GIC and Townsend Group.

Apart from the two NBFCs, KKR also has a presence in the debt market through Mumbai-based Avendus Capital. KKR had agreed to acquire a majority stake in Avendus Capital in November 2015. Since then, Avendus has transformed from a pure-play investment bank to a more diversified company that also offers wealth management, alternative asset management and credit solutions services.

ADIA’s India play

Hamad Shahwan AlDhaheri, executive director of the private equities department at ADIA, said the deal is consistent with “ADIA’s approach of seeking principal investments in market-leading businesses alongside strong and high-quality partners”.

The sovereign fund of the UAE’s biggest emirate has ramped up its investments in India in recent months. Last month, VCCircle reported that ADIA picked up a minority stake in Singapore-based Cube Highways and Infrastructure Pte Ltd, a joint venture between private equity firm I Squared Capital and International Finance Corp (IFC), the private investment arm of World Bank.

The fund has also bet on a few companies that went public this year, such as Reliance Nippon Asset Management, CX Partners-backed Security Intelligence Services (India) and securities depository firm CDSL.

ADIA has also agreed to invest $1 billion (Rs 6,470 crore) in the government's National Investment and Infrastructure Fund’s (NIIF) Master Fund.

The Indian government had created NIIF to catalyse capital from international and domestic investors into energy, transportation, housing, water, waste management, and other infrastructure and allied sectors in India. The government has committed around Rs 20,000 crore ($3 billion) for the fund, or about 49% of the total target corpus of Rs 40,000 crore.

In the infrastructure sector, ADIA subsidiaries also own minority stakes in two renewable energy companies in India—ReNew Power and Greenko. In real estate, ADIA has made a $200 million investment in Kotak’s realty fund.

ADIA invests across the world, from developed and emerging market equities, fixed income and private equity to real estate and infrastructure, with 55% of its assets invested via index-replicating strategies. Its assets are estimated at $633 billion, according to the US-based Sovereign Wealth Fund Institute, which tracks the industry.

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