When bad is good: KKR looks to lend more, buy Indian NBFCs

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KKR & Co. is seeking to lend in partnership with Indian banks and buy more local non-bank financiers as a funding squeeze in the world’s fastest-growing economy creates opportunities for US private equity giants.
“We are in dialogue with banks to see if there are creative ways to partner" to lend to small-to-midsized companies, B V Krishnan, chief executive officer of KKR India Financial Services, said in an interview in Mumbai. KKR is also looking for acquisitions of Indian non-bank lenders, according to Krishnan, in line with what people with knowledge of the matter said in October.

Global investors from Oaktree Capital Group LLC to Varde Partners have mulled lending to companies in India, where the lack of a deep bond market and a bad-debt crisis have constrained borrowers’ attempts to access longer-term funds. Financing for smaller firms has dried up since a string of shock defaults by shadow lender Infrastructure Leasing and Financial Services Ltd (IL&FS) put the non-bank financing industry under a spotlight.

Dewan Housing Finance Corp, a mortgage lender, has seen its stock price sink and credit ratings cut over the past month after being hit by allegations of inappropriate fund transfers, claims that it denies. Its parent sold a 70% stake in Aadhar Housing Finance Ltd, a lender to low-income individuals, to funds managed by Blackstone LP earlier this month.

Blackstone plans to make an initial capital infusion into Aadhar of about $112 million, which will reduce to about half the company’s debt to equity ratio, the US firm said in a statement this month.

KKR already operates two local non-bank financiers - KKR India Financial Services Pvt and KKR India Asset Finance Pvt - and also manages credit funds in India with outstanding loans of about 11,000 crores ($1.55 billion), data provided by the company show.

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