Private credit might be less attractive than it was last year as investors rush into the market, but there are sweet spots to be found.
The largest investor, Providence Equity Partners, acquired a 15% stake for an estimated $400 million, while TA Associates and ChrysCapital are reported to have invested around $120 million each for a collective 8% stake. The fourth investor is reported to be Citigroup which bought the remaining 2% stake - though no confirmation has been made.
This is the first investment in Asia for US-based Providence which has more than $9 billion under management and invests mostly in communications and media companies. Jonathan Nelson, the firm's CEO, says: ôWe plan to continue partnering with media, communications and information companies in Asia that, like Idea, are led by experienced management and have established businesses with significant opportunities for growth.ö
The deal is also the first foray into Asia for TA Associates which has $10 billion in capital and has investments in more than 370 companies including a number of communications companies. Its CEO, Kevin Landry, says: ôIdea Cellular, as one of the fastest growing wireless carriers in the fastest growing wireless market in the world, is a good illustration of the type of private company, in an exciting growth industry, in which TA seeks to investö.
For ChrysCapital, the deal is the largest investment the firm has made to date and its first in the telecom sector. ChrysCapital is an India-focused player managing $1 billion across four funds. It has made more then 30 investments since it was founded by Ashish Dhawan in 1999.
Financial details of the deal were not shared by AV Birla group or the private equity players. Idea is currently in the æsilent period' preceding an IPO, which is expected to be launched in the first quarter of 2007. As the sell-down was made by Birla TMT Holdings, an unlisted company, and Idea is also currently unlisted, neither the Birlas nor the investors are obliged to disclose terms of the transaction.
Idea was earlier named Birla Tata AT&T, a joint venture between IndiaÆs two leading business groups, the Tatas and AV Birla. This year ownership differences between the two surfaced. The issue was resolved with the Birlas buying out Tata's 48% stake. The Tata stake was purchased by various Birla group companies with Birla TMT Holdings acquiring the largest chunk of 33.14% and the 15% balance being picked up by listed companies in the group. The group announced at the time that Birla TMT Holdings would dilute its holding in favour of financial investors and the transaction has been anticipated for the last six months.
The Tata stake changed hands in April at a price which translated to an equity value of Rs92 billion ($2.04 billion). Based on the $400 million reported to have been paid by Providence for a 15% stake, the equity value of Idea now is $2.66 billion, a 30% increase over the price paid to Tata.
Idea is currently on a high growth trajectory in an industry which is itself experiencing exponential growth. On October 4, Idea announced it had crossed the 10 million customer milestone. Meanwhile, India recently overtook China as "the worldÆs fastest growing wireless market", a point highlighted by Providence MD, Bis Subramaniam in describing the investment. Ajit Nedungadi, a director at TA Associates, cited the ôlow level of wireless penetration in Indiaö as a compelling reason for the firm's investment.
The private equity transaction coincided with an announcement on October 28 that Sanjeev Aga will move to Idea as managing director effective November 1. Aga relinquishes the same role at Aditya Birla Nuvo to take on the new responsibility. Aga has been associated with the groupÆs telecom business since 1998 and is seen as a natural fit to move back to Idea and lead the charge.
Regulators keep their eyes open on tightening insurance industry by introducing more detailed risk management requirements, which could bring pressure on smaller players.
China and India are more obvious choices for AustralianSuper to consider in Asia Pacific, but the super fund currently lacks the expertise and prefers to stick to the US and Europe.
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Investors are increasingly turning to private companies and private debt in their hunt for ESG alpha, but the age-old problem of transparency and due diligence remains