US private equity firm KKR said that on Monday the Abu Dhabi Investment Authority (Adia), one of the world's biggest sovereign wealth funds, has become a minority shareholder in its unit, KKR India Financial Services (KIFS), an alternative credit business that provides long term financing to companies and medium-sized enterprises.
"India continues to be an underserved financial services market, with shallow capital markets and an over-reliance on banks for wholesale financing," said BV Krishnan, chief executive of KIFS.
"KIFS has consistently provided flexible credit financing solutions to companies and shareholders, keeping in mind their long-term objectives for their business. ADIA's investment in KIFS gives us a high-caliber partner to work alongside as we further scale our platform and deliver creative solutions in the market."
The amount Adia paid for the stake in KIFS wasn’t disclosed. An Adia spokesman declined to comment on the financial details of the investment. KIFS is one of the leading structured credit providers in India and over the past eight years it has lent US$4 billion to companies.
"India is one of the world's fastest growing and most dynamic markets, and Indian businesses are increasingly seeking alternative credit solutions," said Hamad AlDhaheri, executive director of the private equities department at Adia.
"KIFS has played an integral role in the development of this important form of financing in India and, through our investment in the company, we look forward to supporting the continued evolution in the market. Becoming a shareholder in KIFS is also consistent with Adia's approach of seeking principal investments in market-leading businesses alongside strong and high-quality partners."
Adia has been active in India over the past year. In October, the fund signed a $1bn agreement with the National Investment and Infrastructure Fund (NIIF) to invest in much-needed energy, transportation and other infrastructure-related sectors in India.
Adia, as part of the agreement, will become the first institutional investor in NIIF’s Master Fund as well as a shareholder in National Investment and Infrastructure Limited, the NIIF’s investment management company.
The deals come amid increasing interest by Adia in emerging markets as a whole amid slowing growth in developed economies. Adia has investments in a number of asset classes including equities and fixed income in India.
Adia is also in advanced talks with India’s GMR Infrastructure to buy up to 49 per cent of Rajiv Gandhi Hyderabad International Airport, The Economic Times business daily in India reported in July, citing unnamed sources.
Adia's investments in India also come amid flourishing ties between India and the UAE after prime minister Narendra Modi’s visit to the country in 2015.
During the visit, Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, met with Mr Modi and the two countries pledged to boost trade with each other by 60 per cent, as well as investing up to $75bn in infrastructure.
Since Mr Modi came to power in 2014, the fortunes of the economy have improved as the reform-minded prime minister moved to cut red tape and reduce subsidies.
The IMF is forecasting that the Indian economy will grow 7.2 per cent this year, more than double the expected average for global growth.
Still, a recent slowdown in economic growth has made investment in infrastructure even more urgent in order to reach the 8 per cent annual growth rate needed to create enough jobs for the country’s 1.3 billion population.