Kejriwal's Kedaara Capital to Invest in Spin-offs; Eyes $75-100m Deals

Kedaara Capital, a private equity fund manager set up by Manish Kejriwal (the former head of Temasek India) and Sunish Sharma (former managing director of General Atlantic India), will largely focus on investing in carve-outs or spin-offs of large corporates and involve more in operational responsibilities, sources briefed with the matter told VCCircle. Kedaara is adopting an investing style much on the lines of international private equity firm Clayton, Dubilier and Rice (CD&R) with which it has partnered for a $500 million India-focused fund. While the nature of the partnership between Kedaara and CD&R is not known, sources added that it would be more on the lines of a JV.

While Kedaara will prove to be an entry point for CD&R in India, which does not have an on-the-ground presence yet, the bulge-bracket private equity firm will provide Kedaara with not only a brand name but also access to Limited Partners (LPs) to help its debut fundraising. The investors in CD&R include endowments/ foundations, corporate pension funds, public pension funds, insurance companies and financial institutions among others. CD&Rs investing style is to combine investment and financial insight with operating wherewithal.

The global PE firm has helped management transform businesses - from its landmark purchase from IBM of what is now Lexmark International, a publicly traded global inkjet printer manufacturer, to the $15 billion acquisition of rental car leader Hertz from Ford Motor Company. Resonating this model, the Indian PE fund manager will also focus on investing into carve-outs or spin-offs of large corporates that no longer fit with their core strategies, sources told VCCircle. The firm will be taking controlling positions and building businesses with management teams as partners, a strategy, however, is now turning fashionable among Indian fund managers.

The firm is looking at a ticket size of $75 million to $100 million per investment. A Kedaara Capital spokesperson could not be contacted till the time of writing this article. Unlike private equity firms that rely solely on financial engineering and farming out operating management responsibilities to consultants, Kedaara is positioning itself as a private equity firm where much of the value will be a product of operational enhancements.

It is looking at building an operational heavy advisory board comprising of former rockstar CEOs and also has plans to incentivise them, the sources said. The PE firm will also look at investing into emerging leaders in high growth companies. Such strategy of doing both growth equity and control transactions opportunistically is seen in many private equity firms of late.

For instance, India Equity Partners and Peepul Capital have been doing such transactions. Kedaara recently hit the fundraising ground and is expected to raise money even in a difficult fundraising environment, sources added. It has received verbal commitments from a few institutions globally, sources said.

The firm was formed in October last year, when Kejriwal and Sharma transitioned out of their global investment firms to set up their own firm. The duo was also joined by Nishant Sharma (not related to Sunish Sharma), a former principal at GAs Mumbai office. Kejriwal, who was with Temasek since 2004, was in charge of the firms investments in the Middle East and Africa.

During his time at the fund, Temaseks key investments included taking a stake in the National Stock Exchange of India, GMR Energy, ICICI Bank and Bharti Airtel. While at General Atlantic, Sharma focused on transactions in the consumer, healthcare, financial services sectors. He joined the firm in 2004 from McKinsey where Kejriwal also worked.

As many as 60 India-based private equity firms are out on road to raise money for their first or follow-up funds, expecting to mop up over $13 billion, with most of them being first time funds or spin-offs from institutions. Indeed, the number of funds seems substantial and it will be interesting to see whether the LPs are going to digest it all. Copyright 2012 All rights reserved.

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