Private equity giant KKR & Co said on Friday it has raised a record $9.3 billion for its latest Asia fund, its biggest pool of capital for a region where it is chasing larger deals.
“We see a diverse set of opportunities across Asia Pacific stemming from rising consumption and urbanization trends in key markets as well as larger carve-out and cross-border transactions in countries such as Japan,” Ming Lu, head of Asia private equity, said in a statement.
Joseph Bae, managing partner at KKR Asia, said the region offers “many compelling investment opportunities” in private equity given its “secular growth and attractive valuations”.
KKR said the third fund takes the total assets that it manages in its private equity business to over $68 billion worldwide.
It also adds to the mountain of dry powder lying with Asia-focussed PE firms that management consulting firm Bain & Company estimates at $136 billion at the end of 2016. Asia-focussed PE firms raised $43 billion in 2016, lower than the $51 billion the year before, Bain said in a March report.
The KKR Asian Fund III received backing from global pension funds, sovereign wealth funds, insurance companies, family offices and wealthy individual investors, the PE firm said.
The buyout firm itself committed about $800 million to the fund, its second-largest commitment to a KKR fund, said Alisa Wood, head of private market products group at the firm.
So far, the KKR Asian Fund III has announced one investment, in Japanese video and communications company Hitachi Kokusai. KKR is also bidding for the semiconductor business of troubled Japanese conglomerate Toshiba Corp.
The third fund surpassed KKR’s $6 billion Asian Fund II to become the largest private equity fund dedicated to investing in the region. The second fund began investing in late 2013 and is fully deployed. It generated gross internal rate of return of 29.1% and a net IRR of 20.6%.
KKR opened its first office in Asia Pacific in 2006. Since then it has invested over $12 billion in pan-Asia private equity investments in 55 companies across 10 countries.
KKR’s India investments
The PE firm began investing in India in 2006 and opened its Mumbai office in 2008. It has invested about $3.2 billion in 12 transactions in the country.
Besides, it has extended more than $3.5 billion of structured financing to companies in India through its credit, non-banking finance and capital markets businesses. It has also invested about $200 million from its so-called Special Situations business as of 31 March 2017, the PE firm said.
Its recent bets from its second Asian fund include investment in SBI Life Insurance Co. Ltd in December 2016 and investment in Bharti Infratel in March this year.
The PE firm’s investment in Bharti Infratel was from the Asian Fund II and Global Infrastructure Investors II, a KKR executive said. Media reports have previously said that KKR intends to hike its stake in Bharti Infratel.
KKR, through the second fund, had picked up around a 10% stake in Max Financial Services, a majority stake in Avendus Capital as well as a stake in drilling equipment firm Sara Sae, as per VCCEdge, the data research platform of VCCircle.
Besides, the PE firm invested in Gland Pharma from its second fund. Last year, China’s Shanghai Fosun Pharmaceuticals agreed to acquire Gland Pharma. This deal is awaiting government approval.
KKR had also acquired a controlling stake in Alliance Tyres Group, which it sold last year to Japan’s Yokohama Rubber for $1.8 billion.
Its PE portfolio in India also includes Aricent, Cafe Coffee Day, Emerald Media and Magma Fincorp, the firm said.
In recent months, KKR has extended debt financing to several companies through its India-focussed credit funds.
Earlier this year, the PE firm announced the first close of its second India credit fund.
Earlier this month, in an interview with VCCircle, a KKR executive said it would look to extend credit to mid-cap businesses and would target mid-to-high teen returns for its structured finance businesses.