By Rupen Jhaveri Oct 07, 2020
On the heels of KKR’s recent transaction with Jio, we sat down with Rupen Jhaveri, Managing Director for Private Equity in Mumbai to ask him how the deal came together, and what’s on the horizon for KKR in India.
Q: There were a lot of recent investments into Jio. How did KKR get on board?
A: To be honest we were not sure how open Jio would be to a private equity investment, but we have always liked the company. We've been tracking it for the last four years, given our own telecom towers investment in India’s Bharti Infratel, as well as Telxius and Hivory in Europe.
When we entered into discussions with the company, we were able to showcase our strengths –global depth and a local team. There were specific areas where it felt we could add value, like mobile gaming, where we can offer learnings from our investments in U.S.-based Epic Games and AppLovin. Many of us also had first-hand experience with the product as we have a lot of Jio customers within the team, which gave us some insights into the service, etc. We were pleased that they were very welcoming of KKR and one thing led to another.
Q: What is your relationship with Jio like?
A: For us, this is a strategic investment in one of the most exciting technology start-up companies in the world. We have great relationships with everyone from the top to the bottom, which allows us the opportunity to have a lot of informal dialogue as well. We aim to add value by helping to connect the dots, specifically by offering our views on developments in gaming and new technology we see globally. The investment also gives us access to the Indian ecosystem, and as a result we see a lot more technology-related opportunities in India. It also helps further build KKR’s profile as an investor deeply committed to India where there’s a huge amount of opportunity across a range of sectors. For example, we recently invested in Reliance Retail Ventures, a subsidiary of Reliance Industries that also owns Jio.
Q: What was the strategic view for the investment?
A: What excites us about Jio is that it has made telecom and connectivity accessible to pretty much every Indian. KKR has seen in other markets how that connectivity can do wonders for education, healthcare and other industries. Jio is dramatically changing the digital landscape in India with their low cost/high value add approach. They have brought the latent demand for content, data and such to the forefront and made it possible for everyone in India to participate as an empowered digital citizen.
Q: This was a joint deal with KKR's Asia private equity and growth technology funds – can you talk more about how that worked?
A: Our growth technology team was immediately excited because Jio represented many of the exact themes they invest in in the rest of the world: cybersecurity, enterprise, fiber, connectivity and digital services. And in India, who better to invest in than the best technology company available? Depending on specific circumstances and needs, our teams come together and I think that's the beauty of being part of an integrated firm, as opposed to silos or just having one product. We focus on the opportunity and then put the best resources at KKR behind it.
Q: How did you work together with the growth technology team?
A: Each part of KKR brought its strengths to get us where we needed to be. The India team was leading the deal and various execution facets. The growth technology team clearly offered value based on their experiences in global emerging markets including others around Asia: analyzing the potential Indian trajectory based on these other market experiences and various other parameters.
Likewise, my technology colleagues in America brought their technical expertise to the table. For example, they led a due diligence session with Jio’s Chief Technology Officer to learn more about their technology, vendors and stacks.
Q: How long did it take from the moment you guys picked up the phone to closing the deal?
A: It was relatively quick! Closing took about one month, so all in all about a month and a half. It helped that we had various teams from different parts of the world on hand. We don’t think it would have been possible otherwise.
Q: What do you see on the horizon in the coming years for KKR in India?
A: Jio has made telecom and connectivity accessible to pretty much every Indian and taught us that there’s a huge pent up demand for digital services. Connectivity is opening doors to a lot of other areas, which we are watching - from edtech to healthtech, content, and smart manufacturing. Take home fiber, for example – today’s home fiber market in India has a huge runway for growth. The market itself only has 20 million subscribers in a country with about 200 million homes. Jio is not aiming to only take a percentage share of the 20 million subscriber market. They want to expand this market from 20 million to 100 million by looking for opportunities across India’s entire fiber market value chain.
Fiber is going to be like oxygen; we will need fiber going forward. So, what does that mean for, say, the fiber infrastructure? What does that mean for networking equipment? We're, therefore, not solely focused on just the end product Jio delivers, but it has opened our investment horizon to a lot of opportunities elsewhere.
Q: KKR is often referred to as a US private equity investor, but as you point out, KKR has been in India for 11 years. From your perspective, where is KKR in terms of its global footprint?
A: At KKR we often talk about our global/local approach. The firm has offices in 20 cities across four continents, including eight offices in the Asia Pacific region. These, however, aren’t just skeleton outposts with a small team carrying out mainly administrative functions. Our investment professionals are local and have deep networks as a result - they’re the driving force behind the deals. This was certainly the case with Jio and Reliance Retail Ventures. I see this as quite remarkable. Of course, there are regions where we don’t have the full suite of products due to the market’s maturity, as well as rules and regulations, but we are present in every region where we see strategic opportunities. For example, the Philippines wasn't on the map for KKR a few years ago, but in 2018 we invested behind a fintech services provider, then in late 2019 we followed up with our largest hospital deal there and in July this year we invested behind a private power generation infrastructure company that accounted for over 21% of the Philippines’ gross power generation in 20191.
With the Jio deal now closed, Rupen and the KKR team are excited to work with even more Indian founders and business leaders in the future.
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