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How KKR India reached a debt end

The marquee private equity firm’s strategy of lending to growth companies and risky turnarounds has backfired badly, denting its reputation as a savvy financier

A deafening silence filled the conference room at KKR India’s Mumbai office when the question was raised. The senior management, which included Henry Kravis and George Roberts, the firm’s co-founders, were visibly upset about its lending business in India. In 2018, KKR India Financial Services (KIFS), the wholesale lending arm, was in a state of disarray.

What was meant to be a routine strategic review meeting was now taking quite a different direction. Over the video conference, the US team, seated at the New York headquarters, did not mince words. “Can someone please explain to us how you are losing capital in the credit lending business?” asked the two co-founders almost in unison. The team in India led by Sanjay Nayar, KKR India’s CEO, seemed to have been caught off guard. Some big-ticket investments were in danger of being completely written off and there was no defence. Amtek, Avantha Holdings and JBF Industries were the bad bets, followed by a smaller debt to Kwality Dairy. Together, this added up to over $850 million (See: Credit where it wasn’t due). That video conference ended quietly, but the dissatisfaction was conveyed loud and clear. 

KKR & Co’s Kravis and Roberts are a feisty bunch. If they weren’t, they wouldn’t have ended up building a private equity powerhouse. Their then record takeover of American conglomerate RJR Nabisco in 1988 for $25 billion inspired a book and a movie titled Barbarians at the Gate. “Barbarians” emanated from the war cry of noted buyout artist Ted Forstmann, who felt left behind by the KKR co-founders’ aggressive leverage to fund the buyout. It is a bit ironic that the same intensity, but in lending, is now causing its Indian arm much grief.

In 2009, KKR was one of the first global PE firms to offer debt financing to Indian firms through KIFS and through its global credit fund. In both, many transactions have gone awry. It was not an abrupt edge of a cliff, more a downward spiral which began with the need to grow the loan book at any cost. In this urgency, KIFS backed the wrong promoters and offered l

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