Alternative investment giant Kohlberg Kravis Roberts & Co Ltd (KKR) has agreed to invest in home-grown financial services firm Avendus Capital for a controlling equity stake, in a move that would enable Avendus scaling up its services in wealth management and private equity, besides foraying into NBFC space with credit solutions.
A statement from the company did not officially say how much equity stake KKR is buying but a company spokesperson told VCCircle that it is picking a 70 per cent stake in Avendus through a combination of new shares and a secondary sale of stock by existing investors.
In a response to an email, KKR spokesperson said, "KKR will be a controlling shareholder (with 70 per cent equity stake) and Avendus’ promoters will continue to drive the business." Further details like the deal amount and structure, however, could not be ascertained. Separate emails sent to Avendus did not elicit any response on the aforesaid development by the time of filing this article.
According to the agreement signed by the two firms, KKR is purchasing shares from Eastgate Capital and Americorp Ventures, an early investor in Avendus. These two investors together held around 41 per cent stake in Avendus while each of the three co-founders held 14.7 per cent each.
KKR is making its investment from its Asian Fund II, it said in a statement.
“We have excellent potential to expand our businesses and to become a comprehensive financial services provider to India's first-generation businesses. KKR's capital commitment and support will enable us to provide synergistic services and products to these clients, which can catalyse their growth,” Ranu Vohra, managing director and CEO at Avendus, said.
The three founding promoters—Ranu Vohra, Gaurav Deepak and Kaushal Aggarwal—will continue to lead Avendus's operations.
“As Ranu, Gaurav, Kaushal and the Avendus team continue to build on this banking franchise by seeking opportunities to elevate the company to the next level, KKR's investment will help this effort by accelerating the build-out of the company's investment banking platform," said Sanjay Nayar, member of KKR and CEO of KKR India.
The proposed deal is subject to customary regulatory approvals.
This will be the second significant deal in pure investment banking space after 2011 when Enam was acquired by Axis Bank.
Mumbai-headquartered Avendus is one of the top mid-market investment bankers in the country and also has a separate alternative asset management unit. In the last five years, it claims to have closed around 34 international transactions.
Headquartered in Mumbai, the firm has offices in Gurgaon and Bangalore. Avendus Capital, Inc (US) and Avendus Capital (UK) Pvt Ltd located in New York and London, respectively, are wholly owned subsidiaries offering M&A and private equity syndication services to clients in the respective regions.
Recently, it appointed Deepak Bhandari to head its European subsidiary Avendus Capital (UK).
KKR has been an active investor in India through both its PE and credit or lending portfolio business. Early this year, the PE giant made a debut exit from its Indian portfolio by selling its entire stake in Bharti Airtel’s telecom tower arm Bharti Infratel Ltd.
The alternative investments major has been particularly bullish on growing its credit related offering in India and with Avendus it is looking to add a third layer to the existing set-up. It already has an active NBFC in the country and early this year formed a separate NBFC for real estate sector along with GIC.
Dubai-based private equity fund Eastgate Capital Group had invested $25 million in the firm in 2008. Eastgate is the PE arm of NCB Capital, the investment banking arm of the National Commercial Bank of Saudi Arabia (NCB).
On the other side, Americorp Ventures—controlled by Madrid-based non-resident Indian (NRI) businessman Harish Fabiani and his brother Kamal Fabiani—is an angel investor associated with Avendus since its inception in 1999 with 13 per cent equity interest.