KKR & Co. L.P. (KKR), in collaboration with Singapore sovereign wealth fund GIC, announced the launch of its second non-banking financial company (NBFC) in India with the purpose of lending in the Indian real estate sector. The world’s largest private equity firm had initially started an NBFC to finance realty projects in India, with GIC putting in an investment of around $150 million.
Why Indian Real Estate?
The real estate sector has arrived at a saturation point in almost all the developed countries, compelling international real estate firms to search for profitable opportunities in developing nations such as India. With favorable demographics and an emerging economy, India is fast evolving as the hub of global investments.
With a huge imbalance between the demand and supply in the real estate sector, India presents an extensive investment opportunity for global participants. To capitalize on the same, KKR established NBFCs to offer structured credit solutions to the property developers.
KKR began investing in India in 2006 and currently the firm’s total equity investments in the country surpass $1.5 billion. Moreover, the firm has provided over $2 billion of structured financing to 21 business groups in India via its credit and capital markets business.
With the development-focused Modi government coming to power in India, the investment prospects for foreign investors further widened. To encourage global lending, the government relaxed the foreign direct investment (FDI) norms in the real estate sector in October last year.
KKR actively invested in the Indian real estate business throughout 2014 and participated in three deals with a total worth of around $190 million.
Our Take
KKR has been shifting its focus from leveraged buyouts to broader markets. The firm has committed over $1.8 billion in real estate equity in U.S., Europe and Asia through its real estate platform launched in 2011. Moreover, the firm’s increasing focus in the Indian real estate market will likely procure high yields given the anticipated infrastructure boom in India.
Currently, KKR carries a Zacks Rank #3 (Hold). Some better-ranked investment managers include Affiliated Managers Group Inc. (AMG), Brookfield Asset Management Inc. (BAM) and Janus Capital Group, Inc. (JNS). All these stocks hold a Zacks Rank #1 (Strong Buy).
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