India's Kotak eyes $400mn in 3 debt funds
Reuters
25 March 2009
The offshore asset management arm of India's Kotak Mahindra Bank is in talks to raise about $400 million in fixed-income funds by the end of April from Asia-Pacific, the Middle East and Europe, a top official said.
"Right now we are speaking to investors," Paul Parambi, head of international business for the Indian private sector bank, said in an interview on Wednesday. "We are getting interest."
The firm aims to collect about $300 million in a fixed maturity plan, offering predictable returns. It expects to raise another $100 million in two open-end debt funds, betting on maturities of more than two and five years.
The investors will include fund-of-funds, private banks, insurance firms and family offices, Parambi said.
Kotak had raised $300 million in an offshore debt fund last November and has $1.2 billion in total assets under management.
Last week, India's market regulator had allowed Kotak's international asset management arm to raise slightly more than $800 million to invest in domestic corporate debt.
India had raised the ceiling on foreign institutional investment in corporate debt to $15 billion from $6 billion, and allocations were made after bidding.
Kotak, along with firms such as Barclays and Deutsche Bank which won collective allotments worth $5.8 billion, must raise the funds within 45 days.
"I wouldn't expect too much of that to get actually utilised," Parambi said.
Indian federal bond prices have slumped in 2009 under the weight of heavy government borrowing. The benchmark 10-year yield, which moves inversely to prices, has shot up more than 150 basis points even as the central bank slashed its short-term lending rate by 1.5 percentage points this year.
Investors are concerned that a huge federal borrowing plan might undermine monetary policy and push bond yields higher.
Government borrowing for the financial year that begins on April 1 is set to hit a record 3.62 trillion rupees ($71 billion), after it doubled to 3.06 trillion in 2008/09.
"Our intention for income funds is that over a period of time we should build up," Parambi said.
By buying debt when prices are down, he said, the funds would look to potentially higher returns when the market picks up.
The international asset management arm of Kotak has a six-member investment team operating out of Singapore and Dubai and has a total staff strength of about 75 people spread across the United Kingdom, the United States, Gulf and Asia. ($1 = 50.9 rupees)
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