MC EXCLUSIVE Avendus sale faces delay as KKR, Gaja Capital squabble over exit premium

KKR acquired a little over 60 percent stake in Avendus in 2015

Private equity major KKR’s sale of Avendus Capital to Japanese financial services conglomerate Mizuho, which is slated to be one of the biggest financial services deals of the year, is facing further delays as the PE firm and some of Avendus' founders and private equity firm Gaja Capital are yet to reach a consensus on deal valuation and other important aspects, sources aware of the development said on the condition of anonymity.

Following more than a year of intense negotiation, Mizuho had emerged as the frontrunner to acquire up to 70 percent of Avendus—purchasing KKR’s approximately over 60 percent stake and portions held by minority investors—outbidding rivals including Carlyle and Nomura.

However, despite the year-long timeline that the transaction has already witnessed, the sources cited said that a final deal is yet some time away as key stakeholders are still ironing out several differences between them.

“Differences still exist between the majority shareholder KKR and the founders of Avendus as well as some differences between the founders themselves and between these sellers and the buyer. These range from the valuation of the deal to the exit of the founders and the future role of those who will stay on,” said one of the people cited above.

According to sources, Ranu Vohra, who co-founded Avendus along with Gaurav Deepak and Kaushal Aggarwal in 1999, is keen to exit the company post the acquisition and is negotiating an exit premium. Gaurav Deepak, currently the CEO, will stay on and has been offered a ten year lock in contract employment period.

The various parties are engaged in discussions to iron out these issues, and are working towards ensuring the deal reaches a fruition, but these efforts to resolve the differences are likely to take some more time thereby delaying the execution of the deal, the source added.

Mizuho, Avendus Capital, KKR and Gaja Capital declined to comment on the development.

KKR acquired a little over 60 percent stake in Avendus in 2015. A year ago, the US-headquartered PE major decided to fully exit its investment in the company. Gaja Capital and Yogesh Mahansaria, founder and CEO of Alliance Tire Group, who collectively hold about 20 percent stake are also likely to exit from Avendus along with KKR.

The deal valued at approximately $700 million, once completed, will mark Mizuho's biggest investment in India, reflecting a major commitment to the Indian market and underscoring the growing strategic interest of Japanese financial groups in the country

Acquiring Avendus will give Mizuho immediate access to India’s rapidly growing IPO and M&A advisory markets, as well as the wealth and asset management sectors. Avendus is a prominent mid-market investment bank with a strong domestic brand, deep client relationships, especially in the technology sector, and a diversified revenue base, including investment banking, credit solutions, institutional equities, and wealth management