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Kotak Mahindra, CPPIB to invest $525M in stressed assets

14 March, 2016

The Kotak Mahindra Group said on Monday it has signed an agreement with Canada Pension Plan Investment Board (CPPIB) to invest up to $525 million (about Rs 3,500 crore) in stressed assets in the country’s banking and corporate sectors.

CPPIB will have the ability to invest up to $450 million of the total amount, the Indian financial services group said in a statement. 

Adam Vigna, MD, CPPIB

“This investment is an important step in CPPIB’s strategy to build a diversified credit business and will add to our direct credit investment capabilities in India,” said Adam Vigna, managing director for principal credit investments at CPPIB. 

A number of companies are looking to invest in or acquire stressed assets in India as bad loans at banks mount and debt-laden companies seek to sell assets.

US private equity firm JC Flowers & Co is floating a joint venture with Ashok Wadhwa-led investment bank Ambit Holdings Pvt Ltd to acquire stressed assets in India. Last month, financial services firm SREI Alternative Investment Managers Ltd, part of Kolkata-based SREI Group, said it was looking to float a Rs 2,000 crore fund to invest in debt instruments of stressed companies.

To encourage overseas investment in asset reconstruction companies, which acquire bad loans from banks and try to recover them, the government in its budget for 2016-17 has proposed to allow 100 per cent foreign direct investment in ARCs without prior approval.

Kotak Mahindra said that, as per the agreement with CPPIB, the two partners will provide bespoke financing solutions to companies and also invest in stressed asset sales by banks with an aim to restructure and turn around companies in distress.

The Indian company has been active in the distressed and structured credit market for over a decade. It also operates in the segment through its affiliate Phoenix ARC, an asset reconstruction company.

S. Sriniwasan, CEO of Kotak Special

Situations Credit Fund

“The current environment has created a much larger opportunity that requires significant capital commitment,” said S. Sriniwasan, CEO of Kotak Special Situations Credit Fund.

CPPIB manages C$282.6 billion (US$214 million) in assets globally as of December 31, 2015, according to its website. The pension fund opened its first India office in Mumbai last October and has invested around $2 billion in India over the past five years.

Earlier this month, the fund bought just under 1 per cent more in Kotak Mahindra Bank from Japan’s Sumitomo Mitsui Banking Corporation for Rs 1,151 crore ($170 million). CPPIB had originally bought a stake in India’s fourth-largest private-sector lender in mid-2013. It now owns 4.9 per cent of the bank.

The pension fund has also backed L&T Infrastructure Development Projects and has formed joint investment platforms with Piramal Enterprises and Shapoorji Pallonji Group, besides investing in third-party PE funds as a Limited Partner (LP). Its Indian LP portfolio includes investments in Multiples Alternate Asset Management and India Value Fund Advisors.


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Kotak Mahindra, CPPIB to invest $525M in stressed assets

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