KKR plans up to $1 bln India-specific debt fund: sources

Last Updated: Wed, Aug 22, 2012 09:30 hrs

By Stephen Aldred and Indulal PM

HONG KONG (Reuters) - Global buyout fund KKR & Co LP is in early stage discussions to launch a debt fund to invest in India that could raise $750 million to $1 billion, sources with direct knowledge of the matter told Reuters.

KKR's first dedicated India fund would aim to benefit from the country's four-year high interest rate and tap opportunities to lend to cash-strapped Indian corporations.

It would also signal that a top global private equity fund sees investment opportunities in Asia's third-largest economy despite a climate of doom and gloom.

Credit funds invest through various methods, including buying distressed bonds or loans and providing richly priced financing to companies which cannot get funding from regular bank sources.

KKR already has experience of credit investing in India through its non-bank financial company, KKR India Financial Services Pvt Ltd, which it funds from its own balance sheet, but is now looking to bring in some of its limited partners (LPs) to raise a credit fund, the sources added.

A credit fund fits the overall strategy of KKR in India, industry sources say, and would give the fund the opportunity to establish lending relationships with borrowers which could lead to future equity investments.

The sources declined to be identified as the plans were not public.

Another global private equity fund, Apollo Global Management , is already raising a debt fund for India of as much as $1 billion with ICICI.

KKR has not yet sent out marketing materials to potential investors and would not launch a new fund until it has closed its second pan-Asia fund, targeted at more than $6 billion, the sources said.

The firm has held a first close of $3 billion on the pan-Asia fund.

KKR received Indian regulatory approval for a fund, KKR India Alternative Credit Opportunities Fund 1, on August 14, documents posted on the regulator's website showed.

"Credit products are already structured and being delivered to Indian corporations through NBFCs (Non-Bank Financial Companies). The AIF (Alternative Investment Funds) licence received further enables KKR to broaden its alternatives strategy in India. Nothing is planned in this regard for the time being," said a KKR spokesman.

(Additional reporting by Nishant Kumar; Editing by Denny Thomas and Edmund Klamann)

More from Sify: