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Kotak to launch Indian corporate debt fund

Kotak Mahindra (UK), a wholly owned subsidiary of India’s Kotak Mahindra Bank, is launching a fixed maturity plan to help foreign investors access the India corporate debt market. 

This follows the closure in early July of Kotak Fixed Maturity Plan-I, which raised about USD140m from investors worldwide.

Kotak says international investors are increasingly looking for ways to invest in Indian corporate debt. They are attracted by the combination of safety of capital coupled with higher returns than are available from companies in western markets.

Data released by the Securities and Exchange board of India shows that foreign institutional investors invested USD6.88bn in debt in India compared to USD6.08bn in equity from January to June 2010.

The Kotak Fixed Maturity Plan-I is a close ended debt fund which aims to generate returns through investments in debt and money market instruments such as domestic bonds of Indian corporates with a tenure of about 12 months. The fund is denominated in US dollars.

Kotak’s next fixed maturity plan will look to raise about USD250m from investors across the globe.

Paul Parambi, head of the international business Kotak Mahindra Bank, says: “From 1992 to 2009, cumulative investment by foreign institutional investors into Indian debt totalled USD7.46bn, whereas, within just the first six months of 2010, net foreign institutional investor inflows in Indian debt touched USD6.88bn. These strong inflows have been driven by the significant difference in the prevailing yields in the Indian markets compared to the western world. The opportunity window for investment in Indian debt is limited as there are caps on the total amount of foreign money that can be invested in the Indian debt market.

“As an Indian investment specialist, Kotak’s aim is to provide investors with a full-range of funds allowing them to access market growth in India. Investors in UK, Europe, Middle East and Far East have been particularly keen and we think they will have a particular interest in our new debt funds.”

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