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Kotak Investment hits final close of special situations fund at $1 bn
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Kotak Investment Advisors Ltd, the alternative asset management arm of Kotak Group, said on Monday it has hit the final close of its special situations fund at $1 billion (Rs 7,130 crore at current exchange rate).

The fund, launched in February 2019, is anchored by a $500 million commitment from a wholly owned subsidiary of sovereign wealth fund Abu Dhabi Investment Authority.

“The Kotak Special Situations Fund has been closed at an opportune time for us. We have a flexible investment mandate enabling us to provide much-needed capital to address the short-term financial dislocation in the market as well as long-term capital to address the NPA (non-performing asset) issue,” said Srini Sriniwasan, managing director and chief executive of Kotak Investment Advisors.  

Several companies are currently starved of credit because of an ongoing liquidity crisis in the banking and the non-banking financial company (NBFC) sectors.

Kotak's new fund is looking at a pipeline of transactions coming through as structured credit solutions as well as mulling potential settlement of non-performing assets under the central bank’s circular issued on 7 June, said Eshwar Karra, chief executive of Kotak Special Situations Fund.

“This is in addition to the opportunities that arise out of the IBC (Insolvency and Bankruptcy Code) process. We believe there is a significant opportunity to provide bespoke financing in a range of situations,” he said.

Stressed opportunities

Kotak Investment Advisors has raised a total of $3.3 billion across asset classes such as private equity, real estate, infrastructure, special situations credit and listed equities.

The new Kotak fund comes at a time when the amount of distressed assets is growing in India, prompting many domestic and international investors to set up similar funds.

In the last two years, large institutions such as State Bank of India, Edelweiss and AION Capital have announced or raised funds to invest in stressed assets. In January, Edelweiss Alternative Asset Advisors Ltd said it had raised Rs 9,200 crore ($1.3 billion) for stressed asset investments. SBI Funds Management Pvt. Ltd is raising Rs 750 crore ($102 million) for a new fund to invest in mid-sized companies with distressed balance sheets.

Many are setting up asset reconstruction companies to buy bad debt from banks. US-based Avenue Capital has picked up a 27% stake in Asset Reconstruction Company (India) Ltd or ARCIL while AION Capital Partners has been strengthening its team for its asset reconstruction company.

Special situations investment firm SSG Capital Management, which makes structured investments via a $2 billion fund, is a majority shareholder in Assets Care Reconstruction Enterprise. Bain Capital Credit India and Piramal Enterprises also have a joint stressed assets platform and have struck two deals this year.  The India Resurgence Fund is also looking at raising a second follow-on fund, as VCCircle exclusively reported earlier this year.

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