In the rarified world of private equity, people speak of Kohlberg Kravis Roberts & Company (KKR) with awe. One of the largest PE firms in the world, the firm has near mythic proportions, in large part because it seems to have access to an endless supply of funds that allow the company to buy into practically any asset in the world that catches its fancy.
This year alone, the company announced acquisitions worth $123 billion. Sources say the firm now has plans to get into India. ''A few law firms, including us, have been sounded off by KKR to help set up operations in India,'' said the CEO of a New Delhi-based legal firm who did not wish to be named.
Officials at KKR's offices in New York declined to comment. Last week though, a senior partner at KKR told TOI that ''Unlike in the West where private equity has acquired negative connotations, in India and other markets, it is viewed as a sexy business. We are looking at India closely.''
As things stand right now, KKR has made one investment in the country. The deal was completed last year when the company picked up the software business of Flextronics International for $900 million. The company has offices in Palo Alto, Singapore and operates predominantly out of Bangalore, For KKR, the investment in Flextronics was its second investment in Asia. KKR's current operations in Asia include recently opened offices in Hong Kong and Tokyo. The company is believed to be looking at China and Korea too as potential outposts to begin operations.
PE firms like KKR acquire companies with significant upside potential. Then, they restructure the firm, usually by selling out underperforming assets, streamline costs and sell it at a profit and generate huge returns for stakeholders. For instance, the $6 billion Millennium Fund managed by KKR has delivered for shareholders an astonishing 55% each year since the time it was launched in 2000.
Recently, KKR led the buyout of Texas-based utility giant TXU for $45 billion. The deal has put the firm under the spotlight after analysts on Wall Street started to ask uncomfortable questions: With the global credit market in turmoil, how does KKR intend to raise the funds that will bankroll this acquisition?
Mega deals like these have also cast a shadow on private equity firms in the western financial world. In large part, this is a function of the fact that such firms have a reputation of being the most discreet deal makers . Practically all of what they do is shrouded in secrecy with investors having little or no access into how the big monies these firms control are managed.
In India though, such concerns are practically non-existent. This year, PE investments is expected to touch $13.5 billion. Evalueserve in a report says there are more than 366 private equity firms in the country with 69 planning to start operations soon. Between the all of them, they seem to have amassed $48 billion for investment in India across the next three and a half years, the report adds.
Source: Times of India