PE firm KKR in talks to buy majority stake in Altico Capital

Industry:    2019-05-06

Global private equity firm KKR is in initial discussions with shareholders of Mumbai-based Altico Capital to buy a controlling stake in the real estate-focussed non-banking financial company (NBFC), two people aware of the development said on the condition of anonymity.

They said there is a possibility of more bidders later joining the fray.

“Apart from KKR, several other PE and strategic buyers have been approached and more suitors are likely to join the bidding process which is being managed by a foreign investment bank,” said the first person cited above. The person did not disclose the name of the foreign bank.

“KKR is actively evaluating opportunities in the NBFC space as it looks to expand to its lending business,” said the second person cited above.

The PE firm was also in talks to acquire a controlling stake in Aadhar Housing Finance Ltd, a unit of Wadhawan Global Capital (WGC), which also controls Dewan Housing Finance Co. Ltd (DHFL). Aadhar was, however, acquired by rival Blackstone in February for more than 3,000 crore.

When contacted both KKR and Altico declined to comment on the talks.

An Altico spokesperson said that the company stands very well-capitalized and prudently levered—significantly superior to defined regulatory requirements. “Our healthy liquidity profile makes us comprehensively stand out among our peers,” the spokesperson said.

Altico was established in 2004 by Clearwater Capital Partners India Pvt. Ltd for wholesale lending to capital-constrained small and medium enterprises in India. It was registered as a non-deposit accepting NBFC with the Reserve Bank of India in January 2005. Its business strategy was initially focused on special situation opportunities. In FY15, the company was rebranded as Altico Capital India Pvt. Ltd, embarking on a change in the business strategy.

Altico has a loan book of over $1 billion which it plans to double over the next 18 months by diversifying into health, education and infrastructure among sectors, Mint reported in October 2018.

In October, the company also elevated the former head of HSBC India, Naina Lal Kidwai, who has been an independent director in Altico since 2016, as its chairman.

With a total net worth of over 2,550 crore, Altico’s equity investors include Abu Dhabi Investment Council, Fiera Capital and Varde Partners. These investors have put in around 2,350 crore as equity over a period of time including the latest round of 350 crore infused in the last week of March.

In February 2018, Altico executed a $75 million, five-year NCD facility with the International Finance Corp.

Mint reported on 3 May that a spate of rating downgrades over the past fortnight has stoked fears of another impending liquidity crisis in the NBFC sector, with a cascading effect on the broader markets that have been on a fragile road to recovery since the Infrastructure Leasing & Financial Services (IL&FS) crisis emerged last September. In recent months, rating agencies have revised credit ratings of certain debt instruments of Reliance Commercial Finance (RCFL), Reliance Home Finance (RHFL), PNB Housing Finance Ltd (PNBHFL) and Dewan Housing Finance Ltd (DHFL). The resulting liquidity crunch and higher cost of capital has prompted many NBFCs and HFC to explore equity sale as well sale of select portfolios on a slump sale basis.

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