KKR bets on stress; Blackstone on realty
The two of the major private equity (PE) investors in India, Kohlberg Kravis Roberts (KKR & Co) and Blackstone Group LP 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’s focus will be more on investing in stressed corporates.
Blackstone recently made a series of dud investments including Gokaldas and MCX, this also announced its foray in the commercial real estate sector. Whereas, KKR said it would invest more in the stressed Indian companies which are in need of immediate funding.
According to analyst, in current era the structured finance deals have been very common and the main reason is that the cost of equity has increased significantly because of the “non suitable” macro scenario. Sanjeev Krishnan, Executive director and leader (private equity & transaction services) at Pricewaterhouse-Coopers, says “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.”
In India, KKR has invested $1.6 billion and its Indian finance company has invested a similar amount in Indian companies whereas Blackstone has invested about $1.7 billion in the country with its latest investments majorly in the commercial real estate space.
Speaking on the situation, CEO of KKR, Sanjay Nayar, stressed on the fact that Indian firms are likely to get structured loans or equity from funds, including the KKR Special Situations Fund. Henry Kravis, co-chairman and co-CEO of KKR, says, “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.”
KKR has invested in an assortment of companies, since 2000. These include Alliance Tire, Bharti Infratel,and Coffee Day Resorts, whereas Blackstone invested in Gokaldas Exports, a textile company, and Moser Baer Projects. The iconic Express Towers in Nariman Point Mumbai may be purchased by Blackstone for about Rs 900 Crore.
Blackstone had changed its senior leadership in December 2013 with Amit Dixit and Mathew Cyriac taking over from Akhil Gupta as co-heads of its India operations and Gupta being made the non-executive chairman of Blackstone India.
Jonathan Gray, the global head of $80-billion real estate fund at Blackstone Group LP says, “Most people have said emerging markets have become too scary and the skittishness benefits investors in two ways. The drop in capital inflows means our capital gets treated better. And you can buy things at a more favorable price because people need your capital more.”
Akhil Gupta, Alliance Tire, Bharti Infratel, Blackstone Group LP, Coffee Day. Nariman Point Mumbai, Gokaldas exports, Jonathan Gray, Kohlberg Kravis Roberts, Kohlberg Kravis Roberts (KKR & Co), Moser Baer Projects, Nariman Point Mumbai, Private Equity, Private equity (PE) investors, Real estate investments, Sanjeev Krishnan
