KKR Seeks Exit from Indian Financial Firm Avendus Amid Tech Boom

KKR, the global investment firm, is preparing to divest its 63% stake in Avendus, a prominent Indian financial services company. This move comes as India's technology sector experiences a resurgence in capital market activities, potentially boosting Avendus' valuation.

Founded in 1999 by Gaurav Deepak, Ranu Vohra, and Kaushal Aggarwal, Avendus has established itself as a key player in India's financial landscape. The firm specializes in deals up to $2 billion across public and private markets, offering services in investment banking, wealth management, asset management, credit, and institutional broking.

Avendus' potential involvement in the upcoming initial public offering (IPO) of Swiggy, the food delivery giant, underscores its growing prominence. Swiggy's IPO, expected to raise between $1 billion and $1.2 billion, could be one of Avendus' most significant deals to date.

The timing of KKR's exit attempt aligns with a positive trend in India's technology sector. After a series of unsuccessful offerings, the country is now witnessing a string of successful tech-related capital market deals. This renewed enthusiasm is likely to support Avendus' valuation, which some reports suggest could reach $450 million.

Potential bidders for KKR's stake include Mizuho Bank from Japan and Emirates NBD from Dubai, along with local sponsors. The sale will test the market's appetite for Indian financial services firms, especially given the competitive landscape with approximately 30 banks vying for market share.

While individual segments of Avendus' business appear attractive, finding a single buyer for the entire operation may prove challenging. Global banks remain cautious about the sustainability of improving fee trends, opting to temporarily relocate executives from less active regions rather than expanding local teams.

India's investment banking sector has shown growth, with fees increasing by 35% to $650 million since KKR's acquisition of Avendus in 2015. This upward trajectory is expected to continue as private equity activity in the country intensifies.

The potential valuation of Avendus at more than twice what KKR paid nine years ago reflects the optimism surrounding India's financial services sector. This sector is projected to reach $1.3 trillion by 2025, driven by initiatives like "Digital India" and the country's growing number of unicorn startups, which exceeded 100 in 2023.

As India's GDP aims to reach $5 trillion by 2026-27, the outcome of the Avendus sale could have broader implications for the valuation of other players in the Indian investment banking landscape. The transaction will be closely watched as an indicator of the sector's future prospects and the continued interest of global financial institutions in the Indian market.