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Kotak plans infra fund even as it scouts for stressed assets

Kotak Investment Advisors (KIA), the $4.7-billion asset manager of the Uday Kotak-led group, is firming up plans to launch a $800-million infrastructure fund that will invest in projects across India.

Separately, the $1-billion Kotak Special Situations Fund (KSSF), an investor in distressed assets, is likely to complete 75% of its investments by December 2021, MD Srini Sriniwasan said in an interview.

“We feel that there is a secular opportunity on infrastructure. The largest component of stress in the banking system is in infrastructure and it is a large opportunity from a special situations perspective. We have gone back to our investors with this proposition to put a significant amount of capital. We are getting a good response and if all goes well, we will shoot for a $800-million fund,” Sriniwasan said.

The new fund will be ESG (Environmental, Social and Governance) compliant and not invest in thermal power. Money will be raised from domestic as well as institutional investors around the world

“We are in advanced discussions with investors and once the investor commits it takes at least one and a half months to complete the transaction document. We hope to be in business by the third quarter of the fiscal,” Sriniwasan said.

This is Kotak’s second infrastructure fund. It had raised a $90 million fund in partnership with Sumitomo Mitsui Banking Corp and Brookfield Asset Management in 2013.

Also in the pipeline is a pre-IPO alternative investment fund for technology companies of about $150 to $200 million for which it is talking to investors.

This even KIA’s main $1 billion KSSF has already invested 55% of its proceeds in varied sectors from steel, cement, nutraceuticals and roads.

Last April, in the midst of the lockdown KSSF helped

promoters bridge a funding gap and complete its buyout of eastern India based cement company Nuvoco. The Rs 550 crore investment has given KSSF a single digit stake in the company which is planning to list in the stock market this fiscal.

KSSF has also backed Mumbai based Sanjaya Mariwala’s nutraceuticals business Omniactive Health Technologies with a Rs 250 crore promoter funding for a stake in the business that will also result in an upside when the company lists on the exchanges.

“Our fund has a wide mandate from structured credit, special situation to distressed – I can do all of it. Before investing, we look at whether a business is in a leadership position or top two or three businesses in the market. If we don’t like the quality of our counterparty, we like to take a controlling stake in the business,” Sriniwasan said.

KSSF is close to finalising the buyout of a Rs 1500-crore distressed road project at a 50% haircut to lenders through a one-time settlement through which it expects steady annuity payments. It has also submitted expressions of interest resolutions through the IBC.

Sriniwasan said he expects a busy fiscal 2022 as funding gaps and opportunities for distressed buyouts increase and as some sectors like real estate bounce back due to a revival in demand.

KSSF has financed Rs 550 crore to the Prestige Group in taking over a project from the DB Group in Mumbai’s Mahalakshmi in February.

It has also bought 5 lakh square feet office space belonging to the erstwhile

Group in Saket in Delhi through a bank-run IBC process last month.

It had also invested $68 milllion in Jindal Stainless, helping promoters pay off creditors and exit restructuring in December 2019.

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