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KKR to carve out RE Sustainability unit

KKR first tried to sell the company in August 2021 and had held talks with Brookfield Asset Management and Temasek Holdings.
KKR first tried to sell the company in August 2021 and had held talks with Brookfield Asset Management and Temasek Holdings.

Summary

  • The private equity firm believes that removing the municipality business, which serves local governments, will make the company more attractive for potential buyers

MUMBAI : KKR & Co. plans to carve out the municipality business from RE Sustainability Ltd (formerly Ramky Enviro Engineers Ltd) that it acquired five years ago, and sell the unit back to its original promoters, two people aware of the matter said.

The private equity firm believes that removing the municipality business, which serves local governments, will make the company more attractive for potential buyers, the people cited above said. The rest of the business largely comprises industrial waste management.

“Most private equity buyers did not want the municipality business because of the government overhang," said one of the two people cited above, both of whom spoke on the condition of anonymity.

Requests for comment emailed to KKR and RE Sustainability remained unanswered.

KKR first tried to sell the company in August 2021 and had held talks with Brookfield Asset Management and Temasek Holdings, Mint reported at the time.

News website Moneycontrol reported in April 2021 that the company had considered an IPO and reported a revival of the sale process in March 2022, noting that a 100% stake in the business was now available. Both times, the transaction did not materialize.

KKR bought nearly 60% in Ramky Enviro Engineers for approximately $530 million in August 2018. The rest is owned by Alla Ayodhya Rami Reddy, who was elected to the Rajya Sabha in 2020 from the YSR Congress.

The company offers services including management of municipal solid waste, industrial waste, bio-medical waste, e-waste, apart from recycling, waste-to-energy projects and integrated environmental services like water and waste treatment services, setting up desalination plants, laboratory services, waste containment, according to its website.

Between FY22 and FY23, the company’s net profit rose from 398 crore to 459 crore, while revenue rose from 2,556.4 crore to 2,996.9 crore, according to data from the ministry of corporate affairs sourced by Tofler.

A Care Ratings report in 2020, however, had described municipal waste management as a competitive advantage for the company, given long-term agreements with municipalities, and prevailing restrictions on setting up hazardous and biomedical disposal sites close to existing sites.

The report also added that the company had proposed a capex of about 2,661 crore during FY20-FY23 for various operations.

“The said projects are expected to be funded through term debt of 1,000.00 (sic) crore while rest is expected to be funded through internal accruals and cash balances available with the company," the report said.

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