KKR & Co, a global private equity (PE) firm, has raised $9.3 billion under KKR Asian Fund III, the biggest-ever mobilisation with investment focus in the Asia-Pacific region. India is expected to attract more than a quarter of the amount as the PE firm expects to close several high-value deals in the country.
After this round, KKR will have $68 billion assets worldwide. In the previous two rounds, it had raised $10 billion in Asia. In the first-ever fund in 2007, it had raised $4 billion that was followed by $6 billion mobilisation in 2013. From these two funds, KKR had invested about $2.8 in India.
“The Asian market offers many compelling investment opportunities in private equity given its secular growth and attractive valuations,” said Joseph Bae, KKR member and managing partner of KKR Asia. “This flagship fund is a testament to KKR’s ability to drive meaningful growth and value creation in our investee companies as a partner of choice to leading Asian businesses, families and management teams.”
About $800 million of $9.3 billion will come from KKR balance sheet and employees, said a company statement. It is 55% larger than the previous fund, which has generated an internal rate of return (IRR) of 20.6% as on March 31. The predecessor fund of the Asian Fund III, KKR Asian Fund II, began investing in late 2013 and is now fully deployed.
Sanjay Nayar, member, and CEO of KKR India, said, “India is an integral part of our Asia strategy and this is an exciting time for investment given India’s macroeconomic environment and constructive government initiatives, as well as rising consumption and urbanisation trends. The closing of our Asian Fund III furthers KKR’s commitment to India and gives us an even greater opportunity to assist market-leading businesses in their growth.”
A senior executive of leading PE firm, requesting not be named, said: “To raise 9.3 billion from long-term institutional investors such as endowment, pension, and sovereign funds is remarkable achievement as these funds have life of 12-16 years. KKR was successful in exiting from some portfolio companies, and has showcased the success story of making a reasonable return for investors.”
According to experts, three factors that will drive investment from large PEs, such as KKR, are positive macro environment, and therefore a predicable growth story, impending consolidation that has started recently across the board, and release of stressed assets, which dragged the banking sector.
“KKR has a strong deals pipeline that are expected to materialise in the current fiscal. They will have the dry powder to negotiate large deals. The fund is in negotiation with half a dozen potential candidates. If that fructifies, it will invest over a couple of billion dollars in these transactions itself,” said a person from another PE firm competing with KKR in some of these deals.
KKR, investing in India since 2006, has put in about $3.2 billion in Indian companies through its private equity business. Additionally, it has provided more than $3.5 billion of financing to companies through its corporate and real estate-focused NBFCs as of March 31, 2017.
Recently, KKR announced its second investment in Bharti Infratel. The first was in 2008. Besides, it is about to invest up to Rs 1,000 crore in Radiant Healthcare and create a healthcare platform. KKR says it expects consolidation and M&A across the board emanating from stress as well as the economic tailwinds.
