Kotak arm hopes to close its $2-billion fund in 6 months

The alternative assets arm of Kotak Group will utilise proceeds from the sector-agnostic fund through a mix of equity, debt, and hybrid instruments, building on the firm’s experience in special and strategic situations.

“We expect to announce the first close of our third Strategic Situations Fund targeting $2 billion by March and complete the final close by June this year,” Eshwar Karra, deputy managing director at Kotak Alternate Asset Managers Ltd told ET.

KIAL had launched its first $1 billion Special Situations Fund in 2019 to capitalise on distressed opportunities. As markets evolved, the strategy expanded to include promoter buybacks, bespoke capital structures, and growth financing. The second fund, with a corpus of $1.5 billion, is almost fully deployed, prompting the launch of the third vehicle. All existing investors are participating in the new fund, with strong interest from new limited partners as well.

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The investor base includes pension funds from Europe and Canada, Middle Eastern and European sovereign wealth funds, and European endowments. “The strategy is backed predominantly by marquee global LPs – pension funds, insurers, and other long-duration institutional investors – with Kotak contributing substantially in every fund to reinforce alignment,” said Karra.

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Fund I has fully returned capital to investors, including the hurdle rate, delivering a gross internal rate of return (IRR) of more than 20%. Fund II has so far returned around 40% of the invested capital and is also expected to generate IRRs exceeding 20%.

In terms of deployment, the first fund made 14 investments, while the second fund is expected to end with a similar figure. For the third fund, KIAL is targeting between 14 and 20 investments. The firm focuses on large, strategic transactions, with typical ticket sizes of Rs 1,000-Rs 1,500 crore.

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