InCred-KKR merger: an unequal marriage

KKR’s troubled NBFC arm KIFS—with a loan write-off of US$141.5 million and a GNPA of 6%—is on the course for a merger with four-year-old InCred Finance. Even as the merged entity irons out differences in its loan book, lending strategy, and management style, straddling multiple NBFC segments may not be as easy

Between a string of bad loans, top-level exits, and rating downgrades, KIFS’ loan book shrunk 16% in nine months

The merger will provide KKR another chance in the India market, while the young startup gets scale and access to KKR’s deep pockets

However, the combined entity, with a loan book of Rs 6,000 crore, will still only be a small player in the segment

It will have to face-off against bigger NBFC players in retail and MSME, and also compete with banks in the corporate segment

“When you pursue growth at the expense of prudence, you are going to get a knock on the nose. The nose will start bleeding, and it is not a good sight.” That, in a nutshell, is how a veteran value investor, known for his deep understanding of India’s credit market, summarises the journey of KKR India Financial Services (KIFS).

A string of bad loans, top-level exits, and rating downgrades, have left KIFS—the non-banking finance (NBFC) arm of global private equity giant Kohlberg Kravis Roberts & Co (KKR)—in a perilous position.

Between March 2019 and December 2019, it had to write off loans worth around Rs 1,045 crore (US$141.5 million) for its stressed accounts.

AUTHOR

Shruti Venkatesh

Based in Mumbai, Shruti covers ecommerce and internet for The Ken. In her previous stints with Forbes India and Outlook Business, she has also covered beats like FMCG, retail, stock market and advertising. When not chasing stories, she loves spending her time binge-watching, shopping and taking a leisurely stroll along the sea-facing promenade at Marine Drive.

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