MEMBER PROFILE

Executive: S. Sriniwasan, Managing Director
Investor Name: Kotak Alternate Asset Managers Ltd (KotakAlt)
Investor Type: Alternate Assets – Private Equity, Private Credit, Infrastructure & Real Estate
AUM: USD9016m
Year Founded: 2005
Main Offices: Mumbai
Geo Focus: Asia
Target Sectors: IT, Real Estate, Healthcare, Consumer Goods and Conventional Energy

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Kotak Mahindra Group is a large financial institution in India with a track record of private equity investments since 1997. What have been some of the key milestones in your portfolio over the years? Can you share any lessons from that period that have influenced your investment approach?

Kotak Mahindra Group established a new Asset Management company in 2005 to focus on Alternate Assets. Over the last 17 years, we have been able to create a best-in-class, comprehensive alternate asset management platform, by virtue of our specialized investment teams and our deep understanding of the Indian investment landscape.

Key Milestones:

2005: First Real Estate Fund and First Private Equity Fund
2018: Reached USD1b AUM
2019: Raised India’s first USD1b India dedicated Special Situations Fund
2021: Raised India’s first Data Centre Fund. Gross Aum grows to USD9b in 2023

India has always been a capital-short country both for equity and debt. This is likely to continue for a while. India has shown far better management of fiscal post covid which has further strengthened the economy. The confluence of all these factors makes India a long-term secular investment opportunity – both in equity and credit – which is unique.

Last year, Kotak launched its Private Credit Fund under the alternative investment fund (AIF) category II. What is the underlying strategy behind that fund?

We run credit strategies at the performing credit level with lower returns as well as Strategic/Special Situations at higher yields. Our Investor base is therefore different for each of these. Credit penetration in India has continued to remain low versus peers and has predominantly been served by banks. Bond markets are underdeveloped in India, especially for non-AAA-rated issuers. Traditional lenders like Banks and Mutual Funds are risk averse. Banks have started focusing more on creating retail and granular books—diversified portfolios of smaller and individual transactions—while reducing their wholesale exposure. Consequently, plenty of capital for AA and above-rated issuers in the mid-high single-digit bracket. With constraints being faced by traditional providers of capital, there is a significant opportunity for alternate investment platforms like private credit AIFs, which will provide customized financing solutions on a timely basis to meet various requirements such as acquisition financing, growth capex, bridge financing, etc. Therefore, we have raised a performing credit fund from domestic LPs of USD160m and a high yield one from Global LP of USD 1.3b. In addition to this, we run specialized Real Estate Credit funds as well.

Kotak also sponsors a dedicated data center fund. Please elaborate on the fund and its growth potential in India. What types of opportunities do you see, and could you share specific details about Sify Infinit Spaces?

Kotak Data Center Fund (KDCF) is uniquely positioned to provide capital to build out data center capacity in India. KDCF is the first India-focused Data Center Fund to partner with data center operators to tap the fast-growing digital infrastructure opportunity in the country. We believe there are various positive tailwinds, which will power data center opportunities in India. Some of these include India’s policy push on data localization, the swift adoption of artificial intelligence tools across sectors and industries and favorable unit economics in building and operating a data center.

Sify Infinit Spaces, Kotak’s key partner in the data center fund, is a subsidiary of Sify Technologies Limited and currently operates 11 concurrently maintainable certified data centers with a total capacity of ~60 MW IT Load. Of these, six are in Mumbai, with one each in Noida, Chennai, Bengaluru, Kolkata, and Hyderabad. The company primarily focuses on offering carrier-neutral colocation services across green data centers that provide a safe and secure environment, along with 24/7 uninterrupted power supply and cooling for end customers. The company’s clientele spans Global Cloud Service providers, OTT content providers, BFSI space (including large banks, insurance companies, fintech, and non-bank financial companies or NBFCs), social media companies and larger enterprises.

How do you identify and execute exits in your private equity investments? Can you provide examples of successful exits you have executed?

We have deep expertise in capital markets and credit markets. Kotak’s Investment Bank is one of the top banks for IPOs and M&As. Many senior management team members at Kotak Alternate Asset Managers come from such backgrounds, enabling us to identify and execute public market exits successfully.

For example, we recently bought CDPQ’s equity investment in TVS Supply Chain Solutions along with the founder. We then successfully guided the company on its recent listing and exited the bulk of our position.

Last year, we also funded a stressed cement maker – Sanghi Cement. Our thesis was that the company would eventually be sold to a strategic buyer. The strategic sale has been announced, and the transaction is expected to be completed in the next few weeks.

We have also taken control positions in certain infrastructure assets, which we are presently operating. These either can eventually be sold or listed as Real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) in India.

For example, the SIFY platform for data centers will likely get listed as a REIT or an operating company.

To summarize, we are flexible and nimble in finding exits, but importantly, we have clarity at the point of entry on how our exit will be achieved.