KKR bullish on healthcare, consumer & tech bets in India

Mumbai: American private equity major KKR is bullish on investment prospects in India amid a volatile global macroeconomic environment and is looking to make large bets on businesses in sectors such as healthcare, consumer and technology, said co-CEO Joseph Y Bae.

The US PE firm is also interested in the government privatisation program said Bae, a Korean-American who grew up in Jersey City before KKR cofounder Henry Kravis sent him to Hong Kong to lead the Asia franchise in 2005. "We think privatisation by governments around the world is a smart thing to do," Bae said. "A lot of the assets that Indian government is privatising is infrastructure and we have a large infra presence in the region. We have the platforms to be a good partner for the government whether its roads, renewables, power and that will hopefully be a meaningful opportunity for us."

'AI Privatisation Opened Doors'

Bae's colleague, Gaurav Trehan, partner and CEO, KKR India, added that the privatisation of Air India has opened the doors for other interesting assets to come down the pipeline.

"Infra is one, there are other industrial businesses and banks," he said. "We have looked at some of those. We think at the right scale and the right risk-reward, those could be interesting opportunities for us. We have very long-term pools of capital; we can hold assets for 10-20 years."

KKR, which began investing in the country in 2006, has so far pumped over $10 billion into India. Some of its biggest bets include Reliance Jio Infocomm, Reliance Retail, Vini Cosmetics and JB Chemicals among others

"India is a very, very important part, not just of our Asia strategy, but also our global strategy. It has incredible fundamental growth," said Bae. "Most parts of the world look choppy and volatile right now, whether its geopolitical tension, interest rates going up, recession and lower corporate earnings in US and Europe. India is in a very different spot. There is really strong fundamental growth. There is strong regulatory and political leadership driving positive reforms in the country. So we are very bullish today on the opportunity set."

Bae sees India's demographics - a relatively young population and a growing middle class - as one of its biggest strengths.

"We think the GDP per capita will keep going up, and it's one of the reasons we are leaning into consumer and retail and technology adoption. Those are the trends that we think are durable and will last for decades," said Bae.

Bae highlighted that KKR's future investments in India will focus on sectors such as healthcare - services and pharma, consumer sector businesses, and technology adoption.

"Our biggest positions today are Jio and Reliance Retail and that's the intersection of various trends. We will try to back leading players who we think are going to be the dominant businesses in decades to come," he said.

Within infrastructure, KKR has so far made commitments worth over $2 billion, Trehan said.

Infrastructure, Bae said, is one of the most attractive destinations to invest in today, globally as well as in India.

"It's a combination of yield, it's a combination of really defensive cash flows and on top of that if it's in these regulated businesses such as transmission or other parts of power, these long-term contracts often have inflation hedges built into them," he said. "So in a world where people are worried about inflation, a lot of these infra assets have built-in inflation protection."

While the PE firm is bullish on various parts of its business, it is also rethinking some of them such as credit and real estate, which the investor was doing through its own balance sheet previously.

KKR merged its corporate lending book with Incred Financial Services last year and is now evaluating options for its real estate lending platform.

"We have taken a strategic decision that we want to exit local balance sheet businesses," Trehan said. "So that's something that we will be winding down. The reason is that we will relaunch our real estate strategy. We think that there is a way to make better returns for our stakeholders through different strategic initiatives and we would not like to be in the local balance sheet."