KKR steps up investments in China

Amrita Nair Ghaswalla Mumbai | Updated on November 21, 2013 Published on November 21, 2013

After private equity interest in the dairy sector in India, investments appear to be flowing to neighbouring China. American private equity major Kohlberg Kravis Roberts (KKR) — which had entered into a joint venture with Modern Dairy (China’s first listed dairy farming company) to deliver raw milk to Chinese consumers — has stepped up its investments in the region.

KKR is a US-based alternative manager with roughly $90 billion in assets under management, including approximately $60 billion in private equity and $30 billion in public markets.

The local arm of KKR has invested more than $1.1 billion (around Rs 68.84 crore) in India since 2006, with its latest stake buy reportedly in the Chennai-based Sanmar Group, which is being used to reduce promoter’s debt and help in the expansion of its chemical business.

According to a recent presentation by the company at the Global Financial Services Conference in Hong Kong, KKR said it was keen to extend its private lending activities and plug the gap in Asia’s underdeveloped debt market. Alternative credit investments are also set to get a boost, with KKR planning to provide loans, advances and other banking-like services to Indian companies.

Big plans

However, the private equity major appears to be on a roll in China, marking large investments.

With the Chinese government stepping up scrutiny of milk and infant formula products following reports of contamination, a new joint venture inked on September 24 envisages that KKR and alternative asset fund manager CDH Investments and Modern Dairy would invest $140 million (around Rs 877.3 crore) over the next 18 months, to build two new large scale dairy farms in China.

Following the bet on China’s booming dairy consumption, KKR also bought a 10 per cent stake in Qingdao Haier, the listed arm of China’s biggest maker of home appliances, for an estimated $556 million (around Rs 3,479 crore). The deal would help the firm gain exposure to China’s home appliances market.

KKR is even looking to make property investments in China, especially after long time competitors and US firms, Carlyle and Blackstone, snapped up high end commercial real estate in Shanghai recently.

For KKR, China and India remain the hottest destinations for investment. Interestingly, talks were on between KKR India, Bain and Company and TPG Capital to invest around $100 million for a stake in Pune-based Parag Milk Foods, a privately held dairy company, late last year. Though KKR eventually did not invest in the milk company in India, IFC stepped in with a $17-million investment in Parag Milk Foods in May, to fund its expansion plans.

KKR recently launched Asian II, a $6-billion private equity fund for deals in Asia, its second Asia dedicated fund. The first fund was raised in 2007, a $4 billion pan-Asia fund, which is fully invested. In 2011, the company raised a $1 billion China Growth Fund for smaller growth deals in mainland China.

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Published on November 21, 2013
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