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India needs a deep, large bond market, says KKR's Henry R. Kravis

India needs a deep, large bond market, says KKR's Henry R. Kravis

India needs a deep, large bond market, says KKR's Henry R. Kravis
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By Nisha Poddar  Dec 13, 2018 6:02:17 AM IST (Updated)

Private equity giant Kohlberg Kravis Roberts on Wednesday highlighted the dearth of a robust capital market in India.

Private equity giant Kohlberg Kravis Roberts (KKR) on Wednesday highlighted the dearth of a robust capital market in India, but remained bullish on the prospects of his company in the world’s fastest growing economy.

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In an exclusive interview to CNBC-TV18, Henry R. Kravis, co-chairman and co-chief executive officer, said, “India needs improvement. It has no capital market but only an equity market. India needs a deep, large bond market.”
Kravis weighed in on the friction between government and central bank after Urjit Patel abruptly resigned amid a face-off with the centre over issues related to governance and autonomy of RBI.
"Government and central bank friction is not new, it’s the same in the US as well. Central banks have to be independent for growth of the economy," he said.
Aiming to be a capital provider powerhouse, KKR has a new team in place for the growth of its credit business. “We are positioned to be a 100 percent solution provider to a company we associate with,” Kravis said.
Kravis finds an opportunity in India to provide funds in various forms for different requirements. Pointing at the liquidity situation, he suggests that everything cannot be dependent on the Reserve Bank of India (RBI).
KKR has expanded its credit business team to capture the opportunities. Karvis said the company is a long-term investor in India and small incidents do not impact their investment decisions.
But on on the liquidity situation, Sanjay Nayar, member and chief executive officer, KKR India, said, “The new government in May will have to take the issue of bank capitalisation head on.”
The private equity firm is steering its strategy more towards buyouts or owning significant minority to actively participate in the investee companies.
Kravis said the firm is more like an industrial house involving itself in the growth of the company rather than making short-term gains by stock price movement.
The biggest areas, which are providing the acquisition opportunities are either the stressed asset situations or the other being the deals emanating out of succession issues, Kravis added.
Kravis remembered that his first big investment, when he launched KKR, was due to a succession issue and India has many of those coming to the fore.
KKR has been keen on the stressed assets space but has not made any investment so far like many other funds, Nayar said, and added that this is an area of interest and KKR is eyeing many opportunities outside of the Insolvency & Bankruptcy Code (IBC) process.
“Many lenders and promoters are now coming forward to resolve the debt issue without going through the IBC process. Even conglomerates with diversified businesses are looking at selling some assets to raise cash and that’s also an area of interest for KKR,” Nayar added.
Kravis said, “Encourage banks to go ahead and take the tough medicine. Putting good money after bad money has never been successful.”
In terms of sectors, KKR has recently made an investment of half a billion dollars in Ramky Enviro Engineers, which is focussed on waste management, and the company is bullish on this segment.
The company is also very keen on healthcare and hospitals, and had made investments in Metropolis and Radiant. Kravis said more can be done in the hospital sector.
“India is the fastest growing economy and the government is pro-business which is positive,” said Kravis. While talking about the global scenario the divide between the rich and the poor is a matter of concern for Kravis.
He said, “Banks in the US are healthy, but the retail loans are a cause of concern. Majority of people cannot arrange for $500 in case of an emergency and are hand-to-mouth, which is concerning.”
KKR is a global investment firm that manages investments across multiple asset classes, including private equity, energy, infrastructure, health care, real estate, credit and hedge funds.
Born in Oklahoma, Kravis is a BA from Claremont McKenna College (1967) and MBA from Columbia Business School (1969). He has more than four decades of experience financing, analysing, and investing in public and private companies.
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