Kotak Plans to Join Venture Capital, Debt, Buyout Space

Kotak Investment Advisors (KIAL), the alternate assets arm of Kotak Mahindra Group, plans to expand into venture capital, venture debt and buyouts, a senior executive said. “Currently, we are not in the venture capital, venture debt and buyout space. These are interesting spaces where Kotak wants to have a presence and thereby build a full suite of products. On the venture capital, buyouts and venture debt front, India doesn’t have many domestic large players and we would like to enter into those businesses”, said Srini Sriniwasan, managing director of KIAL in an interview.

While India’s buyout space has presence of a few domestic and several global incumbents such as Kalaari Capital, Everstone Capital, Blackstone, Carlyle Group, KKR & Co, Warburg Pincus and Advent International, venture debt investments in the country have also picked up pace over the past five years. It has become a popular instrument for startup founders to raise capital without diluting equity. InnoVen Capital, Trifecta Capital, Alteria Capital and Stride Ventures are the key venture debt investors and they have been actively raising debt funds.

Buyouts are typically when a buyer acquires more than 50 percent of a company, resulting in a change of control and ownership.KIAL has yet to crystallize its plans for the foray into buyouts and venture debt business. Besides, the Kotak investment arm also plans to raise follow-on infrastructure fund, an angel fund and a ‘specialized’ 12th real estate fund focused on logistics and office commercial space, Srini said without divulging details on the fund sizes. KIAL has already made 14 startup investments worth ₹70 crore through its proprietary fund deployed in the healthcare and healthtech sectors. “For such investments, we have filed for an angel fund with a

size of ₹150 crore. We will launch it soon”, said Srini, who believes that while it is a late entrant, and there is still room for growth.

In the venture capital space, the alternative investor will be focused on healthcare and healthtech firms. “It is already a $10 billion industry in India. We have to do things which are impactful as an investor and capital must go into it. I am not a big fan of replicating US models here.But the innate competencies that India has is unique”, Srini added. Amid the ongoing funding squeeze for startups after the runaway success in 2021, Srini said that there is enough entrepreneurship going on for the venture capital space to mature. According to him, momentum investment will always become a challenge. “Market works on sentiments and liquidity. At the moment, both are negative. Hence, an investor must choose the investment portfolio. As of now, Kotak has such specifically chosen investments such as Pine Labs and Mobile Premier League (MPL), which are likely to grow bigger”, the veteran investor further said.

Besides, the kotak investment arm also plans to raise follow-on infrastructure fund, an angel fund and a ‘specialized’ 12th real estate fund focused on logistics and office commercial space

Billionaire Uday Kotak controlled Kotak Group’s alternative investment firm was set up in 2005 and is among the largest homegrown private investment firms in the country with total assets under management of $5.7 billion. Its overall existing investments are spread across different asset classes including private equity funds, real estate funds, infrastructure funds, special situations fund, listed strategies and investment advisory. KSSF counts sovereign wealth fund Abu Dhabi Investment Authority, Singapore’s sovereign wealth fund GIC, enterpreneur Azim Premji-owned Premji Invest and parent Kotak Mahindra Bank among its investors. KIAL is in the process of raising its second Strategic Situation fund with a corpus of $650 million-$1 billion by October. In May, it had announced plans to launch a ₹1,000-crore private credit fund.