After $530-mn deal, KKR to stick with Ramky Enviro's present management

Global investment firm KKR on Monday likened its acquisition of Hyderabad-based Ramky Enviro Engineers Limited (REEL) to the Gland Pharma deal concluded last year by Chinese company Fosun Pharma as the existing promoters are likely to play a central role in building the business.   

"This is a little bit like Gland (Gland Pharma deal) in a way that you are taking control of the company and working with the existing management to try and take it to a new level," KKR India member and CEO Sanjay Nayar said as he sought to place the future role of existing promoters on an equal pedestal.  

After the Fosun deal, Gland Pharma's erstwhile management team continued to manage the company as the new owner wanted to utilise the expertise and management skills of the original promoters as they had successfully built a niche, injectable business around a very attractive product portfolio. Fosun had bought 74 per cent stake in Gland Pharma for little over $1 billion. Incidentally, KKR had sold its entire 38 per cent stake in Gland Pharma to Fosun, making handsome returns on its $200 million investment made in 2013.  

For KKR, the present deal constitutes the largest ever investment in an Indian environment management company, which has built waste management, ranging from municipal solid waste to industrial, and biomedical waste management and recycling into a large corporate business activity in the country. 

Ramky Enviro Managing Director and CEO Goutham Reddy confirmed on Monday that he would continue to lead the company while KKR would have its members on the company's board to oversee the business affairs. The global private equity firm is investing $530 million for 60 per cent stake in REEL while the existing promoter and Ramky Group Chairman Ayodhya Rami Reddy will remain as the only other shareholder with the remaining 40 per cent. Existing investors -- IL&FS Private Equity and Standard Chartered, which together hold 11 per cent stake in the company -- are exiting on the back of the KKR deal.  

Nayar said KKR will work with the present management to bring new management practices, better technology and a more thoughtful way of capital allocation towards building it as a world-class environment management company.

Earlier, Ramky Enviro announced that it would strive to reach the Rs 35-billion revenue mark by 2020, from an expected Rs 18 billion in revenues in the current year. It is planning to invest Rs 25 billion in the next three years and most of this outlay will be earmarked to expand the waste-to-energy capacity.

A portion of the primary investment that is coming from KKR by way of acquisition, the internal accruals and debt would be utilised to fund this capital expenditure plan, according to Gautham Reddy. The share of international business would reach 35-36 per cent from the present 30 per cent level in the next 2-3 years, while its Indian business would continue to drive the overall growth of the company, according to him.