Temasek Holdings and Brookfield Asset Management are among at least four global investors looking to buy US private equity firm KKR and Co. Inc.’s 60% stake in Ramky Enviro Engineers for at least $1 billion
Singapore’s state investor Temasek Holdings and Canada’s Brookfield Asset Management are among at least four global investors looking to buy US private equity firm KKR and Co. Inc.’s 60% stake in Ramky Enviro Engineers for at least $1 billion, two people directly aware of the matter said.
This follows the Hyderabad-based company abandoning a plan for a public listing to offer an exit to KKR, the people said, requesting anonymity.
“The fresh plan is to monetize the stake by selling it to a clutch of other global investors, irrespective of the IPO which was earlier being planned by Ramky Enviro in which KKR would have sold its stake through a secondary market window," one of the two people said, referring to the earlier plan for an initial public offering.
KKR wants to exploit a growing global penchant for companies offering environmental services amid a wider awareness about investments aimed at protecting the environment. A potential deal would be the largest in the environmental services industry in India.
“The valuation of Ramky Enviro has gone up significantly, with companies around the world increasingly focusing on ways to prevent environmental damage due to the nature of their businesses," the person cited above said.
The remaining 40% stake in Ramky Enviro is held by Ayodhya Rami Reddy, founder and chairman, Ramky Group, with businesses spanning infrastructure, environmental services, pharmaceuticals and consultancy services.
“There are at least four large global investors who are willing to invest in Ramky Enviro. Temasek Holdings and Brookfield Asset Management are in talks to buy a chunk of KKR’s stake in Ramky. Additionally, two other marquee private equity firms may also come in as new investors. The current discussion pegs the proposed transaction at around $1 billion for KKR’s entire stake," the second person said.
JP Morgan has been hired as the banker to KKR for the proposed transaction.
Spokespeople for KKR and Temasek declined to comment, while an email sent to Brookfield remained unanswered.
In February 2019, KKR completed the purchase of the 60% stake in Ramky Enviro for ₹3,630 crore through a mix of primary and secondary investments. The deal, first announced in August 2018, was the largest foreign investment and the first private equity buyout at the time in India’s thriving environmental services sector. It valued Ramky at an enterprise value of $925 million or ₹6,400 crore.
Ramky is engaged in the business of managing and processing hazardous, municipal, biomedical and e-waste, as well as the recycling of paper, plastic and chemicals, aimed at reducing pollution and improving critical sanitation infrastructure. The company has businesses in Singapore, the United Arab Emirates, Qatar, Saudi Arabia, Kuwait, Oman and Tanzania.
Companies globally are warming up to the ESG theme, enhancing valuations of service providers such as Ramky. Environmental, social, and corporate governance (ESG) refers to the three metrics for measuring the sustainability and the impact of an investment in a business on human society.
“ESG compliance has become a critical element of business sustainability. Gradually, the value of companies adhering to ESG standards is increasing, which in turn is steadily enhancing the value of firms that are in the business of providing solutions to such ESG companies," the second person said.
Ramky also deals in generating power from waste while offering consulting and integrated environmental services. It is in the process of commissioning a 20MW plant in Hyderabad. The plant, its second in India after a 24MW waste-to-energy plant in Delhi NCR, will process 2,800 tonnes per day of garbage.
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