KKR to put $250 mn into Bharti Infratel

KKR to put $250 mn into Bharti Infratel

In another sign of the growing interest of foreign finance firms in the Indian telecom market, one of the fastest growing in the world, New York-based private equity (PE) firm Kohlberg Kravis Roberts and Co. (KKR) will invest $250 million (Rs990 crore) in Bharti Infratel Ltd—the subsidiary and tower arm of telecom firm Bharti Airtel Ltd.

The investment will come from its Asia-dedicated PE fund and its global PE fund. In December, Bharti Infratel had received $1 billion investment from Temasek Holdings Pte Ltd, the Investment Corporation of Dubai (ICD), Goldman Sachs and Co., Macquarie Group Ltd, AIF Capital Ltd, Citigroup Inc. and India Equity Partners.

With this cumulative investment of $1.25 billion, Bharti Infratel now accounts for the second largest PE investment in an Indian firm. The first was Temasek’s 2007 investment of $1.90 billion in a PIPE deal (private investment in public equity) for a 4.99% stake in Bharti Airtel. The next largest unlisted investment is ICICI Venture Funds Management Co. Ltd’s $800 million investment in Jaypee Infratech Ltd , for the Taj Expressway Project connecting Greater Noida with Agra.

Bharti Infratel is the second deal in India for leveraged buyout giant KKR, which globally had equity investments of more than $86 billion as of September. KKR is best known for its $30 billion RJR Nabisco Inc. deal in 1988. KKR’s first deal in India was the country’s first and largest leveraged buyout. In 2006, KKR, with Sequoia Capital, acquired software development and solutions business of Flextronics International Ltd (now Aricent Inc.) in a transaction valued at $900 million. Flextronics, which has operations in India, retained 15%.

KKR currently has no offices in India. There were murmurings in the market last year that they were looking to set up offices here, but KKR did not confirm them.

Bharti Infratel owns more than 20,000 sites and has a 42% stake in Indus Towers Ltd, a joint venture between Bharti Infratel, Vodafone Essar Ltd and Idea Cellular Ltd that has 70,000 sites. Bharti Infratel and Indus Towers will provide services to all wireless telecom operators in India.

India’s mobile services market has been adding around eight million subscribers a month. There were 233.6 million subscribers at the end of December, which means more than?one-fifth?of?the?population has access to a cellphones. The industry expects greater demand based on rising incomes, cheap tariffs and expansion of networks to rural areas.

On Monday, Bharti Airtel’s rival Reliance Communications Ltd said it plans to sell 10% of its tower unit in a public issue.

Bharti Infratel has an enterprise valuation of $10-12.5 billion. Its shares on the Bombay Stock Exchange dropped 3.8% on Wednesday to Rs900.40 each, as the Sensex index dropped 2.81% to 18,139.49.

Reuters contributed to this story.