India Awards: PE Deal of the Year – Alliance Tire Group

"We are cautiously optimistic that the next two years could be very active for private capital deployment," Nayar says. "Private equity will be a critical source for meeting the capital needs of economic growth once reforms resume and investment climate improves."

In 2013, the combination of macroeconomic headwinds and currency devaluation prevented many companies from reaching their full potential but at the same time opportunities opened up spanning carve-outs, significant minority stakes and complete buyouts.

According to AVCJ Research, KKR deployed more than $700 million in India. Minority investments included drugs manufacturer Gland Pharma and Apollo Hospitals Group, while the headline buyout was Alliance Tire Group (ATG).

The PE firm is understood to have paid $450-500 million for a more than 80% stake in ATG and assumed around $125 million in debt, allowing Warburg Pincus to exit its interest in the business.

KKR committed $300 million in equity from its first Asia fund, with Crescent Capital Group Ivy Funds' Ivy High Income Fund providing the remainder through a mezzanine financing. Offshore funding was available because ATG is a global business, principally selling its off-highway tires (OHTs) to agriculture and construction industry customers in Europe and North America. Annual turnover is in excess of $500 million.

Heramb Hajarnavis, a director at KKR, says the firm is providing ATG with sales and marketing expertise as well as in improving supply chain efficiency and production processes. "Alliance is in the process of ramping up capacity in its existing plants and is also building a new green field plant in west India which will further expand its manufacturing footprint," he adds.

Having established itself as a global player through a combination of organic expansion and bolt-on deals, ATG is also keeping an eye open for potential M&A opportunities. The growth potential of the business lies in rising global demand and easing competition - OHT remains a challenging market segment, requiring intensive, specialized manufacturing capabilities and more than 2,000 product lines.

"As global manufacturers move away from this segment, ATG sees it as an opportunity to satisfy unmet demand in traditional markets such as North America and Europe and also emerging markets in rest of the world," Hajarnavis says.

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• Topics
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• South Asia
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• AVCJ Awards