Mumbai: Buyout firm Kohlberg Kravis Roberts and Co L.P. ( KKR ) plans to sharpen its focus on larger investment deals in India, following the closure of its second Asia fund that raised $6 billion (around Rs. 36,000 crore today), the biggest pan-Asia private equity (PE) fund till date.
The firm, which has invested less than $50 million in at least three firms each in India till date, will now scout for investment opportunities of $75 million and above, Sanjay Nayar, chief of KKR India, told reporters in Mumbai on Wednesday.
The PE firm will start investing immediately from the new fund, he said, adding, “we will not do many sub-$50 million deals in India. Our focus is large transactions now, the energy spent on small and large deals being the same”.
This, however, does not mean that KKR will ignore smaller transactions. “In India and China, you cannot invest by a rule book. One has to be flexible and that is our strength. We can still consider small deals, but the story has to be extremely compelling,” Nayar said.
As was the case with its Asian I fund, there is no designated allocation for India from the new fund too.
“$6 billion is a lot of dry powder (capital in hand to be invested). A lot of limited partners (or LPs, who invest in PE funds) asked what the split is (geographically), it depends on the opportunities available and the risk-reward they offer,” said Nayar.
KKR’s new fund has been raised at a time when fundraising by PE firms has fallen drastically across Asia, with LPs concerned about economic slowdown in China and a dormant initial public offerings (IPO) market.
Asian fundraising fell to $53 billion in 2012 from $64 billion in 2011 and reached $15 billion in the first half of 2013, according to data from LP Source, an online database of PE deals and investors by Dow Jones.
Other global firms like TPG Capital and Carlyle, which started raising new funds nearly at the same time as KKR, are in the process of raising corpus.
“LPs want to see returns. In our new fund, nearly 60% are return LPs and almost all have increased their (cheque) size,” said Nayar.
Avinash Gupta, senior director and leader, financial advisory, Deloitte in India, said LPs are positive on Asia and its growth prospects.
“LPs would like to allocate more and higher amounts to Asia. Better-known and better-managed platforms with a wider appeal—like wider geographic exposure and larger sector experience and freedom to invest across listed and unlisted space, will find favour with them.”
KKR has been active in India since 2006, with total investments exceeding $1.1 billion. Its India PE portfolio includes Aricent, Bharti Infratel Ltd, the Max India Group, Coffee Day Resorts Pvt. Ltd, Dalmia Cement Bharat Ltd, the JSW Group, Magma Fincorp Ltd and TVS Logistics Services Ltd.
Tyre maker Alliance Tire Group was KKR’s latest investment in India.
The new fund from KKR comes at a time when the number of PE investments are falling in the country.
Private equity and venture capital deals declined 25% in the first six months of this year. The period between January and June saw 279 VC and PE deals worth $5.2 billion, compared with 373 deals worth $4.4 billion last year, according to VCCEdge, which tracks deals. Nayar, though, believes the PE industry will remain active in India since “there are few options of funding in the country”.
The focus areas will continue to remain the same for KKR, with interest strong for consumer and consumer product firms, healthcare and education.