KKR to acquire stake in investment bank and wealth manager Avendus Capital
US private equity firm, KKR, is set to acquire a majority stake in Wealth Management firm, Avendus Capital for around $100m. The deal aims to leverage Avendus' strong, existing tech-centric niche to create a full-service "new generation" financial service platform with Avendus' founders remaining at the helm.

NEW DELHI: Homegrown, midmarket investment bank Avendus Capital — the hottest deal shop for all things technology and consumer internet — is set to close yet another headline transaction. But this one will be for itself.Bulge-bracket US private equity group KKR is set to acquire a majority stake in the 15-year-old advisory, asset and wealth management firm in a unique deal that aims to create a full-service “new generation” financial service platform leveraging Avendus’ strong, existing tech-centric niche, multiple sources familiar with the development told ET. The proposed deal — a combination of new shares and exits — will be worth around $100 million and the founders will continue to remain at the helm, one of the sources said.The three founding promoters— Ranu Vohra, Gaurav Deepak, Kaushal Aggarwal — together with their leadership team currently own a majority in Avendus Capital.In 2008, Eastgate Capital, the private equity and realty investment arm of NCB Capital of Saudi Arabia, had picked up a little over 26% in the firm for Rs 100 crore. Eastgate is likely to exit. It’s not clear if other investors—angel, high net worth and legacy investors— will cash out entirely or pare holdings, but KKR will straightaway take a majority stake and may ramp up this further in phases. The broad contours of the deal have been finalised. However, the deal is only likely to be concluded by November, sources added.The proposed move will provide Avendus access to strategic capital and help leverage the brand and network of KKR to diversify and deepen its presence in investment banking. The deal is also expected to boost Avendus’ wealth management and private equity divisions besides aiding its planned entry into lending through the nonbank finance company (NBFC) route.“The founding promoters want to now take Avendus to the next level and explore cross-border opportunities for which they needed to have an access to independent and strategic capital, and that’s where KKR comes in,” said a person involved in the transaction on condition of anonymity. “For both its NBFC and asset-management plans that will play a key role.”Avendus has been looking to start a separate NBFC. Over the last few years, it has built a strong portfolio in the wealth management space with a strong pipeline of high net worth investors and also launched three funds for alternative asset management.Ranu Vohra, MD and CEO of Avendus Capital, and Sanjay Nayar, CEO, KKR India, declined to comment.“It is a deal which marries one of the best global brands in asset management with the local insights and relationships of a domestic firm that has come to be known for its ability to work very closely with local entrepreneurs across the emerging, technology and internet sector,” said another official. “But today as a full-service investment bank, it has diversified capabilities even in consumer and financial services. In a space largely dominated by Wall Street names, Avendus is a local success story, one that has been run by professionals themselves.”KKR, with over $101 billion of assets under its watch, is already backing local financial services players like Magma and Au Financiers. Still, KKR’s latest move is a bold one, analysts said.“It’s the power of the Avendus franchise, which is a function of its people and brand equity,” said one of those cited above. “They don’t have a regular flow of income as they don’t use their balance sheet. Like most peers on its street it too has had its ups and downs, having had to close its institutional equities business recently. Typically, financial investors stay away from such cyclical businesses, but KKR is making a very interesting play.”Started in 1999 by its three founders in their twenties as Coolstartups, it transformed from a “venture catalyst” into a full-blown financial adviser with its first major break in 2009—co-adviser along with Goldman Sachs for the sale of Satyam Computer. Avendus then went on to advise the promoters of Patni on the sale to iGate and worked on Wipro ’s acquisition of Australia’s Promax Applications.Avendus was ahead of the curve in IT and BPO in the early 2000s. It has since focused on consumer and life sciences. In the last 18 months, it has benefited from the early faith in the country's internet startup ecosystem that has seen a fund-raising frenzy and even a few consolidations like Ola’s acquisition of TaxiForSure, on which it was an adviser. According to Tracxn, a Bengaluru-based startup tracking company, emerging Indian tech startups raised $4.75 billion in 2014 and another $3.2 billion so far in 2015. Avendus has been at the forefront of most of these mandates.Its digital practice, led by rainmaker Ashish Bhinde, struck a record 17 deals last year. The momentum continues with some of its marquee assignments for legacy and new clients including ShopClues.com, Freecharge, Bluestone, Saavn and Quikr.Back of the envelope calculations show Avendus Capital has raised about $2 billion (around Rs 13,000 crore) for over 51 companies. This led to record ibanking fees of Rs 160 crore last year, trumping domestic peers and even most global firms. Such dominance has forced many Wall Street giants to tweak their India strategy to focus on mid-market transactions and chase smaller ticket size digital deals. Avendus has tripled its investment banking team to about 75 people from 25 in 2010. It also claims to have one of the highest closure rates in the segment.“Avendus gives comfort to its clients, particularly the new generation entrepreneurs. They are a young team who are totally in sync with the needs of young startups who are also targeting the youth. So they can relate to us and take ownership,” said the CEO of a leading ecommerce company who has given it a mandate to raise capital.The Avendus-KKR deal would be the second deal in the pure investment banking space after Enam Fin was acquired by Axis Bank in 2011 for aboutRs 2,000 crore. In July, Prem Watsa's Fairfax India Holdings decided to buy up to 26% of IIFL Holdings for about Rs 1,600 crore, a move that will take the Canadian investor's stake to over 40%.