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Perspective

Throwing good money after bad
The story of how the chase for high yield ended up hurting KKR India's debt portfolio

N Mahalakshmi

Banks getting wiped out because of bad loans has pretty much become a regular feature these days. But when a global private equity firm of repute loses money hand over fist, you cannot not sit up and ask what just went wrong. KKR & Co. founded by Jerome Kohlberg Jr, Henry Kravis and George Roberts is a behemoth on Wall Street with assets under management of $190 billion across private and public markets. It has a storied history, having the distinction of clocking some of the biggest leveraged buyouts, right from the LBO of RJR Nabisco in a $25 billion deal way back in 1989 to the record buyout of Energy Future Holdings at $48 billion in 2007, the largest LBO thus far in US history. 

When KKR & Co. entered India, it made a rather unconventional hire in Sanjay Nayar. Coming from Citibank, Nayar was quick to sense the opportunity in the debt market and over time, he and his team tried to create a high-yield portfolio, lending largely to small and medium sized growth companies through the firm’s NBFC arm. That high-yield strategy has ended up damaging KKR’s debt portfolio irreparably. Part of the reason is the overall economic slump, which resulted in growth faltering and turnaround failing to materialise as anticipated. Ironically, a debt portfolio has turned out to be a disaster when it’s supposed to be safer compared to a private equity offering. You can read the complete account of what went wrong at KKR India in our cover story. 

While one would often associate daredevilry with high reward, there is one milk cooperative which has gone about growing rather quietly. Not that there hasn’t been any controversy during its 73-year-old history but GCMMF has marched solidly forward. And now, it is raring towards new products and markets in its quest to hit the one trillion rupee revenue mark. In our feature, we look at how Amul is keeping up with the times. Finally, the story of how HCL Tech is playing catch-up with the big boys of Indian IT.

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