Kedaara Capital breaks mold for Indian PE firms with record capital raise

Kedaara Capital has raised a record $1.7 billion to put it on par with the deep-pocketed global players that have dominated the space for years

By Preeti Singh and Baiju Kalesh

Kedaara Capital has broken the mold for Indian private equity firms, raising a record $1.7 billion to put it on par with the deep-pocketed global players that have dominated the space for years.
 

Fresh off the capital injection, Kedaara is now betting its local expertise and deep knowledge of the health, consumer and finance sectors will make it easier to work with firms like Blackstone Inc. and Carlyle Group Inc. that are hunting for deals in the world’s fastest-growing major economy. 

“Exits to global sponsors who have so much dry powder but not the same level of deal flow in the segment for larger deals will become a greater option for us,” Kedaara Co-Founder Sunish Sharma said in an interview from Mumbai.

While raising $1 billion or more is common for giants like KKR & Co., it’s rare in India, and Kedaara has now done it twice, following a $1.1 billion fund three years ago. As it puts more fresh money to work, Kedaara’s portfolio investments could be targets for global players looking for majority stakes in fast-growing firms. Blackstone alone aims to add $25 billion in Indian assets, while KKR and Goldman Sachs Group Inc. are eyeing deals.

The new fund marks a watershed for Kedaara, a company backed by Clayton Dubilier & Rice LLC that was co-founded more than a decade ago by Sharma, along with Nishant Sharma and Manish Kejriwal, the former India head of Temasek Holdings Pte.

The three partners worked together at McKinsey & Co. and have built a team of 40 executives, including 24 investment professionals. Sunish and Nishant Sharma — no relation —  are the deal makers, while Kejriwal and Sunish Sharma manage investors and fundraising. The firm runs about $5.6 billion in assets.

Kedaara Capital Investment Managers Ltd., which counts several Canadian pension funds, insurance giant Allianz SE and HarbourVest Partners LLC among its investors, generated a gross internal rate of return of 40 per cent to March 24 for its first $540 million fund in 2013, Nishant Sharma said. The latest fund, which closed last month, brought in new investors including Singapore’s GIC Pte and the University of Minnesota endowment, according to people familiar with the matter.

Kedaara is looking to make four investments a year from its latest fund, writing equity checks of $75 million to $200 million, while bringing in additional capital for larger deals. Kedaara aims to take three companies public this year and in 2025, Nishant Sharma said. 

“When you get a window for an IPO, you take it and don’t try to over-optimize it,” he said, adding that IPOs have been the dominant exit route for Kedaara, including Vedant Fashions Ltd. and microlender Spandana Sphoorty Financial Ltd.

Domestic Consumption 

Kedaara has made 29 investments across its three funds in consumer-focused businesses, including financial services and adjacent industries like packaging materials. Those include AU Small Finance Bank Ltd., whose stock has more than doubled since going public in 2017. The fund also backed Vishal Mega Mart Pvt., which could raise as much as $1 billion in its initial public offering. 

To capture new opportunities, Kedaara is building out its investment thesis around the intersection of health and consumers, where more businesses like Estee Lauder Cos-backed Forest Essentials skincare company will emerge in the next five years, according to Sunish Sharma.

In addition, the firm is exploring investments in consumer-driven preventive health businesses, and will draw on its experience with Vishal Mega Mart to expand in the packaged-food businesses. 

“A big proportion of India still likes its biscuits and chips,” said Sunish Sharma.  

In a sign of growth, Kedaara has moved to new offices in the Altimus building in Mumbai that’s more than 60 per cent larger than its previous space. Office neighbors include global firms like TPG Inc., Morgan Stanley and Ontario Teachers’ Pension Plan.

International Hires 

While Kedaara’s investment focus will continue to be on India’s domestic consumption, it’s also looking to hire executives in the US to explore opportunities between the two countries, according to Nishant Sharma. 

The firm plans to recruit a senior operating partner with a background in tech services and an understanding of the US to mentor the management teams at its portfolio companies, he said.

The US accounts for between 70 per cent and 100 per cent of the market for some Indian technology services companies, and many Indian entrepreneurs are creating firms there, Sunish Sharma said. 

“The intent is to have a foot in both countries to build a channel for investments in India, and to take Indian companies to the world,” he said.