KKR-backed Ramky Enviro launches sale process, firm’s valuation may exceed $1.5bn

KKR-backed Ramky Enviro Engineers (recently re-branded as Re Sustainability), the country’s leading environmental solutions and waste management player, has launched a proposed transaction to sell a controlling stake in the firm.

On April 18, 2021, Moneycontrol was the first to report that the firm had initiated preliminary discussions with i-bankers for a strategic review, which could include either an IPO or a stake sale by KKR. The listing plans were reportedly shelved later.

“ The sell-side advisor JP Morgan is reaching out on behalf of KKR which holds 60 percent stake and the balance stake held by Ayodhya Rami Reddy can also be on offer in a bid to unlock value,” said one of the persons cited above. The option of a complete 100 percent buyout exists now, this person added.

On April 17, 2020, Bloomberg had reported that KKR was weighing the sale of its stake and seeking buyers.

Ayodhya Rami Reddy, who holds the remaining 40% stake in the firm is the founder and chairman of the diversified Ramky Group, which is present in the infrastructure, environmental services, pharmaceuticals, and consultancy services.

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A second person added that initial feelers had been sent in recent weeks to a series of strategic suitors as well as private equity funds and that the likes of I Squared Capital and Eversource Capital may express interest amongst others.

With accelerated adoption of the ESG theme globally by corporates and investors, this is an opportune time for a transaction like this, added a third person.

“ This is by far the largest platform of its kind in the country in terms of capacity and number of projects and offers a very diversified portfolio of services. The combined valuation of the firm is likely to be upwards of $1.5 bn,” this person added.

Environmental, Social, and Corporate Governance (ESG) refers to the three metrics for measuring the sustainability and societal impact of an investment in a company or business.

A fourth person confirmed that the sale process has begun adding that teasers have been sent out and that infra funds, as well as strategic players, may evince interest.

All the four persons above spoke to Moneycontrol on the condition of anonymity.

In response to an email query from Moneycontrol, Re Sustainability said, “We regret to inform you that there will be ‘No Comment’ from our side on this issue. It is our policy to not respond to market speculations.”

When contacted, KKR declined to comment. Emails sent to I Squared Capital and EverSource Capital were left unanswered at the time of going to press. JP Morgan could not be reached for an immediate comment.

Sustainability 2.0: The KKR factor

KKR announced the acquisition of a 60 percent stake in the firm in August 2018 for $530 million. Back then, it was the largest buyout by a PE fund in India’s environmental services sector. The investment was part of the private equity firm’s impact investing strategy, which refers to identifying businesses with positive social or environmental impact.

Earlier in March, Goutham Reddy, the MD & CEO of Re Sustainability said “The rebranding marks a milestone in our company’s transformation from an industry leader in waste management to a company that will accelerate its focus on sustainable solutions. The company’s new identity is built on a circular economy model—recycling everything—to provide sustainable solutions for the people and planet.”

“We want to expand our global waste management capacities to 15 mtpa ( million tonnes per annum) from about 7-8 mtpa . We are also looking at acquisitions, especially in geographies such as South East Asia,” he said. Reddy added that the company hopes to close FY22 with revenues of Rs 3,000 crores and profit after tax of around Rs 550 crores.

According to recent reports, Re Sustainability manages municipal solid waste in 23 cities in India, the Middle East, and Singapore. The firm also manages over 1 mtpa of industrial hazardous and other regulated wastes across 22 locations in India, the Middle East, and the US. The biomedical waste management footprint includes 25 facilities in India and the Middle East, servicing more than 4 lakh hospital beds across 45,000 healthcare establishments. It is also present in automated car park management and facilities management in Singapore.

In January 2021, Thane-based Antony Waste Handling Cell, a key player in the municipal waste management industry, made its debut on the domestic bourses.

Source: Money Control

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