Global PE firm KKR has made its first strategic investment in India’s cash-hungry infrastructure sector via IndiGrid, sponsored by Sterlite Power. CNBC-TV18’ spoke to Sanjay Nayar, member and CEO of KKR India, and Pratik Agarwal, Group CEO of Sterlite Power, on what the fund was betting on and their future strategy.
Sharing the rationale for the deal, Nayar said, “Infra is something we have been looking very carefully and we haven’t been comfortable for a long time. I think today’s government with the past actions, the kind of investments they are making and the way they are driving private sector to invest – that is great example of how they have put so much money into the grids, gave us confidence that if there was a deal to do it would be in this space, that is one reason.”
“Two, the innovation that they have introduced through Infrastructure Investment Trusts (InvITs) wasn’t catalyzed till now and so we thought it was a great opportunity to catalyze infra capital inflows by doing a deal in an InvIT structure. Three, this was an opportunity of partnering with a great developer and a great operator like Sterlite Power,” said Nayar.
"Most important from a capital point of view, we are actually underwriting and buying into very long term, regulated, core infra asset, which are these transmission grids and that brings you back to the point, given today’s policy, given the kind of public sector contracts that they have, this makes it a very-very attractive, less worrisome rather guaranteed cash flows coming from long-term 35 year take-or-pay contracts, so I think that is very important," said Nayar.
According to Agarwal, the transaction was a partnership because Sterlite is a stated developer of assets. “Sterlite is a specialized developer which takes greenfield risks, converts a paper project to a long-term annuity project."
"Moreover, there is a lot of capital like KKR which are looking at investing in long-term annuity projects but limited capital that is willing to take greenfield risks. Therefore, Sterlite with this partnership is derisking its growth strategy by bringing in a lot of new capital by bringing in investors directly into its operating assets and thus freeing up its dry powder to invest back into global development projects in countries like India, Brazil and beyond", said Agarwal