Private equity firms may list in India as IPO market expands: KKR Global Co-CEO Scott Nuttall

Gaurav Trehan (left) with Scott Nutall

Scott Nuttall, the Global Co-CEO of KKR, who led the US private equity giant's public listing in New York is betting on private equity firm's adopting the listing route in India. This even as the red-hot domestic IPO market saw 14 mainboard issuers seeking more than Rs 46,000 crore in October — an all-time high for a single month.

"Based on my experience, if the institutional and retail investor market is educated on how private equity firms make money, the fee component, the carry component, and how the enterprise grows over time — there’s no reason to think this industry is harder to understand than any other industry. As the IPO market continues to expand, it wouldn’t surprise me at all to see private equity firms and more broadly, alternative asset management firms list here. I think it’s just a matter of time," Nuttall said during a media interaction in Mumbai.

He was responding to a query by Moneycontrol on the readiness of the local market for a big-bang private equity listing and if private equity firms could take a cue from global MNCs during an exciting phase which has included blockbuster market debuts by the Indian arm of South Korean consumer electronics major LG Electronics.

Nuttall elaborated, "I wouldn’t rule it (PE listings) out, but I do think it would most likely be a local, India-focused alternative firm that would go first."

Incidentally, home-grown Gaja Capital has got the Sebi nod for the country's first IPO by a private equity firm.

KKR, founded by cousins Henry Kravis and George Roberts along with Jerome Kohlberg in 1976, established its India office in 2008. The firm has historically deployed more than $13 bn across nearly 40 investments and has pumped in $9 billion in the country since 2020.

Nuttall indicated that local deployment would grow "dramatically" going ahead.

"Globally, KKR will invest between $90 and $100 billion this year (2025). Given India’s position as the world’s fifth-largest economy and soon to be the third, we would expect our activities in India to increasingly resemble the firm’s global profile over time. Even though $9 billion makes us one of the largest private capital investors in the country today, that number will grow dramatically in the years ahead," he said.

He also highlighted India's contribution in the Asia portfolio.

"Our two most active markets in Asia are India and Japan, and both have delivered exceptionally strong returns. That strength has enabled us to build an Asia platform across private equity and infrastructure that’s truly market-leading. That’s how we think about it, both markets have been critical to that success."

KKR's sale of JB Pharma for $1.4bn to Torrent Group, which resulted in a 5x return and it's exit from Max Healthcare, the largest public market monetization by a PE investor in India are two of the noteworthy deals struck by the firm in recent years.

With the Indian banking sector witnessing back-to-back big-bang inbound deals struck in Yes Bank, RBL Bank and Federal Bank and with the government reportedly mulling an FDI hike in public sector banks, how will the investment giant respond to the opening up of the segment? After all, it has more than $686 bn in total global assets under management.

Nutall alluded to India's friendly investment regime and said, "It feels like you have an incredibly pro-business government which is reinforced by the developments you just mentioned. It really does feel like our type of capital is welcome here, and private capital naturally wants to go where it’s welcomed. That would be my high-level takeaway."

He elaborated, "With respect to specific opportunities, that’s something we’ll continue to look at. We’ve made a number of financial services investments over the years, and I certainly think our portfolio in India will continue to include several financial services investments, both for third-party capital that we manage, and potentially, strategically for the firm as well."

Gaurav Trehan, Head of Asia Pacific Private Equity and CEO of KKR India was also present during the media interaction and hailed the RBI's recent move to permit banks to fund M&A activity by Indian corporates.

On the interplay going ahead between Indian banks, private equity firms and foreign banks in the areas of acquisition financing and private credit, Trehan said, "Generally what we have done with Indian buyouts is we financed them traditionally using equity capital from our funds and dollar debt off-shore which is not a great place to be, you don’t want to fund rupee assets with dollar debt. If this change goes through, it will make the market and transactions much more efficient from a balance sheet perspective. I believe that, once finalized, it will enable rupee-denominated NBFCs and banks to lend more effectively for acquisition financing, creating a more balanced ecosystem for buyouts in India. It will help the industry grow because more efficient financing will become available."

"It will also take certain risks off our balance sheets — where earlier, U.S. dollar financing was being used to fund rupee assets. Eliminating that mismatch is a big positive — for the industry, for Indian companies, and for management teams and boards to make strategic decisions that weren’t feasible in the past. And if this framework does come into play, it doesn’t mean that foreign banks or players like KKR won’t have a role. Different companies have different requirements across various parts of their balance sheet structures, and there will always be areas where banks may not be able to participate. As Scott mentioned, the U.S. is the most competitive and most banked market in the world, yet private credit exists in many forms, India is headed in the same direction. It’s going to be a large economy where banks, with their rupee lending, will cater to certain parts of the capital structure," Trehan added further.

He also shared that one of the key topics being discussed at the firm is how the private equity major can play a leading role in developing India’s corporate bond market.

Earlier this year, on June 2, KKR and Manipal Education and Medical Group inked a $600-million financing arranged by KKR Capital Markets. Later in July, Canada's Ontario Teachers’ Pension Plan Board announced that it has reached an agreement to sell its majority stake in Sahyadri Hospitals Group to Manipal Hospitals, a story first broken by Moneycontrol.

Alluding to the transaction, Trehan added, "Ten years ago, we didn’t own an insurance business. Today, we do in the US, giving us a competitive and scalable pool of capital that extends even to emerging markets like India. For example, one of our most recent transactions involved providing $600 million in financing to the Manipal Group was through our private credit business. Back in 2019, just a little over five years ago, we wouldn’t have been able to do that; we simply weren’t competitive in that space."