kkr: There is a lot of pent-up consumer demand for digital services and India is at an inflection point: KKR executives


Private equity firm KKR said it decided to bet on Jio Platform because of it is a unique combination of a profitable, market-leading telco business with a number of high-growth digital B2C- and B2B businesses built on top. KKR’s India CEO -Sanjay Nayar and Head of Technology Asia – Lucian Schönefelder spoke to Devina Sengupta & Arijit Barman on their investment thesis. Edited excerpts

Did the FB deal accelerate your investment decision ?

Sanjay: We have had a very active dialogue with Reliance for many years and have a longstanding relationship with the family through Henry Kravis and myself.

Reliance was looking for partners that understand technology and that can add value to Jio over the next few years. KKR comes with a unique proposition of having a well established India franchise, with deep understanding of the local economy, coupled with a strong global track-record of technology investing.

We will always try to add value through best-practice sharing from other technology companies in our portfolio and access to our global network.

What makes Jio an attractive bet?

Lucian: Jio is a unique combination of a profitable, market-leading telco business with a number of high-growth digital B2C- and B2B businesses built on top. We haven’t seen such a combination anywhere else in the US or Europe, and it was certainly one of the key attractions for us to invest.

Over the last couple of years, Jio really built one of the most modern, scalable and cost-efficient telecom infrastructures in the world. Even though Jio a telco business at its core, it is built on best-in-class technology that has allowed them to ramp up and scale very efficiently.

What gets us really excited is the potential that this platform has to distribute digital services to consumers through the MyJio app. We think there is a lot of pent-up consumer demand for a lot of digital services and that India is really at an inflection point in that regard.

The other thing that got us really excited about this opportunity, and which can easily be overlooked, is the B2B opportunity that is ahead of Jio.

If you look at IT software spending as a percentage of GDP, India stands roughly at 0.20% of GDP compared to the US at around 1.1% of GDP and Europe at 0.6% There are all sorts of B2B software services that we think Jio can cross-sell together with its B2B connectivity services.

Sanjay: From a macro standpoint, what attracted us is that India is digitizing rapidly, and Indian consumers want to consume content and other digital services at an affordable price point, which is now achievable since data prices have fallen. Secondly, Jio’s compelling entrepreneurial vision. I think the digitized offerings that they are putting together is very impressive, and is a winner all the way.

KKR is a buyout fund. Why change your thesis for a small stake in Jio?

Lucian: We have a track record of supporting technology companies through minority investments. Our investments in GoJek in Indonesia or Bytedance in China are examples of minority deals in the technology sector, invested out of our private equity funds. In addition to this, the investments out of our growth equity funds, are almost always minority investments.

Which KKR pool of capital are you using for investing?

Sanjay: This is coming from our Asia private equity and growth technology funds.

So the bet in Jio is the digital play and less of the telecom/carriage one?

Sanjay: Jio has excellent connectivity infrastructure and are rolling out exciting digital offerings on top. On the connectivity front, they’ve also been very thoughtful in observing how Indians are consuming data and have been able to offer data at affordable price points.

Then there’s the MyJio app, which is bundled with various digital applications for both consumers and small businesses, also at affordable prices. So all in all there is a very stable Telco core with a lot of growth potential on top. And I think what underpins our confidence is Reliance’s proven ability to always deliver on their promises and execute.

After Jio, are you going to invest in more consumer internet companies in India?

Lucian: KKR has made a number of very successful B2C invetsments. If we look in our Asian portfolio, ByteDance and Go-Jek are B2C companies. We’ve made an investment in a Chinese company called Huohua, which is an online education business, and also B2C.

We invested in Trainline in the UK, which is the largest B2C online marketplace for rail tickets globally, which we successfully listed in the UK.

So we’ve seen quite a lot of momentum in our B2C investing activities. That said, what we’ve historically stayed away from — and what we have got to continue staying away from – are really low-margin business models with challenging economics.

We’re more attracted to businesses like ByteDance and GoJek, which are interesting because they have the ability to achieve attractive economics.

Will you invest more in Jio as there are could be other opportunities as well?

Sanjay: It’s too early to say anything.





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