In March this year, Kotak announced the first close of Kotak Strategic Situations Fund II (KSSF II), raising $1.25 billion (about Rs 10,200 crore). The fund has a final target of $1.6 billion. Eshwar Karra, chief executive officer, Strategic Situations Fund, Kotak Alternate Asset Managers, discusses the fund ‘s plans and deal making environment in an interview with Raghavendra Kamath.
Kotak Strategic Situations Fund II announced 75% for the first close in March. How much have you raised till now and how much has been deployed?
We are in the midst of closing documents with a large overseas fund and are in advanced talks with a large sovereign wealth fund as well. This will ensure the full fund raise that we had originally planned i.e. $1.6 billion.
For what kind of credit you are seeing the highest demand, I mean is it for debt refinancing, or promoter financing or for buy outs and so on.
While, we cater to all the three segments, and our fund mandate is designed for such kind of investments, currently, we are seeing a lot of opportunities in growth and acquisition financing.
A lot of domestic fund managers have announced new credit funds and global funds such as Carlyle is studying the market. How do you look at rising competition in the space?
The market is large and in the past, too we have faced competition. We have created our own niche in the Indian market as the largest home grown and India dedicated fund house, and companies recognize and respect us for that. We will continue to grow and deliver returns for our investors through our deep understanding of the market.
With the equity capital markets (ECM) activity tapering off a bit, do you feel private credit deals will become a alternative for the promoters?
Yes. We provide the bridge for such companies and when the markets get better, provide an exit. For companies that are looking at public markets a few years down the road, structured credit provides the ideal financing solutions with flexible capital.
Do you intend to launch any new fund in FY24? If yes, what will be the corpus?
Nothing specific planned now but we are always looking for new ideas and have been the first to launch and implement any new strategy that gives our investors Alpha returns.
Which sectors are offering the maximum opportunities for a special situations investors such as you?
Nothing specific. We are a sector agnostic fund and look to invest wherever we see value.
What kind of internal rate of return (IRR) you are expecting from the investments you make from SS fund II?
Too early to predict at the fund level but for exits that we have made, we have given our investors a reasonable return on a risk adjusted basis.
How do you look at asset reconstruction companies (ARC) taking over stressed real estate loans from NBFCs and HFCs.
ARCS have been doing that for years. It’s been an integral part of their business strategy. Given the long up and down cycles in the business, the ARC is best suited to provide the requisite time and last mile funding to such projects to bring out value for all parties ie original lenders, ARC, borrowers and customers, where the projects are stuck.