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KKR set to enter term loan market with Rs125 crore to Bharat Gears

LiveMint logoLiveMint 07-05-2017 Reghu Balakrishnan

Mumbai: Global alternative investment management firm KKR & Co., which has so far extended private equity and structured credit in India, is set to offer term loans, two people aware of the development said.

KKR is in talks to lend about Rs100-125 crore to Bharat Gears Ltd, India’s largest automotive gear manufacturer, the two people said on condition of anonymity. If concluded, this will be KKR’s first deal in the domestic term loan market.

As per the person cited above, Tashwinder Singh, director of KKR Capital Markets, has been given the additional responsibility of managing the term loan vertical. The firm plans to tap the market with senior secured cash flow-backed debt.

Bharat Gears makes gears, shafts, transmissions, and gearbox sub-assemblies, among others.

“There are vast lending opportunities in the mid-market segment, especially for term loans, where banks keep reducing their exposure to such plain-vanilla loans. KKR wants to build a book of term loans worth $1 billion in 2-4 years’ time,” said the first of the two people cited above.

As per the persons cited above, KKR has made a few senior level hires, who will join Singh’s team.

Singh did not respond to requests for comment. Mails sent to Bharat Gears’ chairman and managing director Surinder Kanwar and joint managing director Sameer Kanwar went unanswered.

Through debt/structured financing, KKR so far has disbursed more than $3.5 billion to about 70 firms in India, including GMR Holdings Pvt. Ltd, Avantha Group, TVS Logistics, coaching firm Resonance Eduventures Ltd, Radiant Life Care Pvt. Ltd and Apollo Hospitals Enterprise Ltd. KKR started its Indian operations in 2008 under chief executive Sanjay Nayar.

“KKR plans to extend its loan portfolio with more term loans in the range of Rs100-125 crore, providing cash flow generations. Though these are sector-agnostic flexi-term loans, focus is on areas like hospitals, education, auto components in Rs200-2,000 crore revenue range,” said the second person. There are about 5,000 potential firms in the mid-market segment in India, creating a lending opportunity worth $35-40 billion.

Though KKR is active in the direct lending business in the US, it has been focused on private equity and structured debt financing in India so far.

KKR’s lending business in India is operated through various arms—KKR India Financial Services Pvt. Ltd, a non-banking financial company (NBFC); KKR India Alternative Credit Opportunities Fund, the first Alternative Investment Fund (AIF) raised by KKR India; and KKR India Asset Finance Pvt. Ltd, a realty -focused NBFC.

The company is also setting up an asset reconstruction company, or ARC, to acquire debt-ridden companies and assets.

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