Kotak Investment Advisors has set its sight on putting together its second and larger fund that would primarily focus on “strategic situations” with a growth-oriented bias, Eshwar Karra, CEO-Kotak Special Situations Fund, Kotak Investment Advisors Limited (KIAL), has said. Mooting of this plan reflects emergence of new opportunities around growth-oriented companies that are looking for expansion, strategic acquisitions and buyout of private equity funds by promoters.

In an exclusive interview to BusinessLine, the Fund CEO said the number of opportunities now are “unimaginable”.

“There’s lesser room in the distressed assets space with most of the large non-performing assets in the banking system having been resolved. However, the number of opportunities are unimaginable on the growth side — providing acquisition funding and strategic situations. Companies are looking for expansion, strategic acquisitions and many companies are also looking for buyout of their PE investors”, Karra said.

First close

Karra said that he was looking at the second half (September-October) of this year for the first close of the Kotak Strategic Situations Fund. This fund will be sector-agnostic and look at opportunities across traditional industries.

“We are looking to raise in excess of a billion dollars this timeagainst $1 billion earlier. We are confident most of our limited partners (LPs) will again back this initiative and up their exposure. They monitor our performance on a monthly basis. Besides existing investors, we will be adding a few others with whom we are in serious discussions. We intend to broaden our investor base and there is a lot of interest from other LPs who have looked at our performance. We have been approached by other large institutional and sovereign wealth funds”, he said.

This will be the second fund that KIAL would sponsor under this strategy and is likely to be called “Kotak Strategic Situations Fund”. It may be recalled that the first fund, “Kotak Special Situations Fund” (KSSF), was launched in 2019 with a corpus of $1 billion from two marquee global investors and a large Indian family office. Nearly 80 per cent of the KSSF funds have been deployed in 12 portfolio companies, and close to $200 million of “dry powder” (liquid funds) is there to meet the pipeline requirements.

Karra also said that the proposed new fund will look to get fully invested by January 2027 and would eye 15-20 companies for its portfolio. “In terms of number of deals, if we have done 12-15 over KSSF 1, we would end up doing 15-20 over here. As we speak, there is a tilt among LPs towards ESG compliance. That will govern in a big way, the sectors we will be focusing on. In the first Fund’s deployment, there are no ESG limitations. However, we have always been cognisant of this aspect in all our investments. As we move forward, ESG is going to be major part of our investment thesis. It may limit our opportunities to some extent, but that’s the price we have to pay for a better future”.

Exits and IBC cases

On exits from KSSF, Karra said he expects two of its portfolio companies — TVS Logistics and Gold Plus Glass — to go in for an initial public offering (IPO) in the coming months. “This year we are also looking at a few exits once the lock-in period is over. The timelines we have given these companies are flexible. One must remember that the capital markets are so unpredictable”, he said.

Karra also said that KSSF is currently not aggressively looking at IBC cases as the fund has only one more year. “Probably when my second fund closes, I may get aggressive on IBC cases. In IBC cases, mostly it will be controlled transactions. We are waiting for pre-packs to come for large companies. More funds will come into India then”, he said.