Mumbai KKR: KKR is exploring strategic options including bringing in a new investor or group of investors in its Indian real estate lending platform KKR India Asset Finance Limited (KIAFL), two people privy to the development said.
The non-bank was founded in 2015 by a US private equity investor with co-investors including Singapore’s Sovereign GIC.
KKR’s move comes at a time when the real estate sector is witnessing tailwinds after a long tough phase that started with the Infrastructure Leasing and Financial Services (IL&FS) crisis in 2018, and then came the Covid-19 pandemic.
With the vaccination campaign now covering most of the Indians, the country’s dwindling number of COVID cases and employees of many companies returning to offices, the outlook for commercial real estate looks healthy, though worries of a new variant still worsen. can play.
On the other hand, with the low interest rate regime, government support, residential real estate has made a strong comeback.
“This is being done because, as determined at the inception of KIAFL in 2015, investors aimed to evaluate their strategic investment options by 2022, which was the agreed period of the fund,” said one of the people. One mentioned above said on condition of anonymity.
He said that the process is still in the initial stage.
“Despite the challenging market conditions for Real Estate Non-Banking Financial Companies (NBFCs) in recent years, KIAFL has maintained healthy growth and kept non-performing assets low. The company has focused on affordable/medium income residential and commercial real estate projects and has seen CAGR of around 20% on its loan books over the last four years.” CAGR is the compound annual growth rate.
The other person mentioned above said that some of the co-investors in the schemes may sell part of their holding in the NBFC.
“Compared to other NBFCs, KIAFL has low leverage, less than once on a net basis. It has a AA stable credit rating from Chrissyland with a liquidity position of over $140 million. Considering these factors and bullish capital market conditions, investors feel this is an opportune time to evaluate strategic options, including another capital increase that will enable the company to accelerate its growth trajectory “
In view of the recent tough macroeconomic conditions, NBFCs have seen their loan book shrink 3,424 crore as on 31 March 2021, from 3,971 crore as on 31 March 2020, a decrease of 13.75%, CRISIL noted in its ratings report dated 13 August.
“The concentration in the portfolio remained high with the top 10 borrower groups constituting around 71% of the loan book as on March 31, 2021. This was also reflected in asset quality metrics with an account slippage, resulting in GNPA rising to 6.79%. Till 31st March 2021 (Nil as of 31st March 2020). The company’s collection efficiency (after including prepayments vested in this asset class) for April 2021 and May 2021 stood at 193% and 212%, respectively, the report said.
KKR declined to comment.
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