Creador is looking to pump in some MYR1 billion ($250 million) into the Malaysian deals over the next four to five years, as the market presents cheaper valuations and relatively low competition.
The private equity (PE) firm has invested MYR600 million ($147.27 million) across the market thus far, focused on consumer-related businesses.
Founder and chief executive Brahmal Vasudevan believed that now is the best time to invest, when “everyone is nervous” amid a soft market.
“We want to make some big bets,” he said in a press conference, when launching its re-branded retail pharmacy investee, RedCap Pharmacy, last Wednesday.
“Markets are down, valuation is cheap, and there are not many competitors (in this market),” he noted.
The firm will continue to focus on consumer-centric sectors, he said, which it has a successful track record investing in.
“I always say our big focus is consumer businesses, you can see our trend in OldTown White Coffee, 7-Eleven, also own CTOS Holdings and Bonia Group,” he listed a few of its Malaysian portfolio companies.
While the firm’s portfolio has included retail, education, food and beverages and financial services, Vasudevan said it is also looking at few other areas that addresses the Malaysian consumers.
“What we don’t do, is invest in commodity businesses, have never done anything in oil and gas or palm oil or rubber. We don’t do anything in businesses that rely on government concessions because we don’t think we are positioned for those kinds of businesses,” he commented.
He explained that, Creador’s investment thesis aligns with businesses that have a strong brand and a point of difference.
“In cooking oils you don’t see that, or whether it’s one petrol station to another, people can’t tell the difference. We like businesses where we can differentiate on quality of service or product difference and so on,” he said.
Creador III almost closed
Last Wednesday, Creador announced that it was committing MRY100 million for the first phase expansion of RedCap.
The funds will be used for RedCap’s continued store network expansion into the Klang Valley, under its new branding. It aims to open 300 stores in the next three years.
While Creador is investing the MYR100 million out of its second fund, Creador II, the firm has also started investing out of its latest fund, Creador III, which Vasudevan said has reached about 80 per cent of its target corpus.
“If (we) need more money for RedCap we can invest out of Creador II or III. Creador III, we are about 80 per cent there; we’ve closed about $350 million, and we are in the process of closing the balance $100 million. We have a few investors in the US and Europe who are in the advance stages of closing,” he commented.
He added that the third fund should have its final close by the month of May or June this year.
Creador’s largest investors include established foreign universities, with considerable war chests to invest from.
“We manage money for universities, pension funds, large family offices and fund of funds; 80 per cent of our capital comes from outside Malaysia,” he said.
Among the most successful investments Creador has made, Vasudevan remarked, has been in OldTown in which the firm doubled its money in a year, and currently in CTOS.
“Our highest return is probably in a financial services company in India, called Cholamandalam Investment & Finance Company Limited, where we are up almost four times in three years,” he said.
“Our return target for our funds are 25 per cent per annum, if we can’t begin to see making 25 per cent a year, we don’t invest,” he said, adding that the firm is willing to take on more risk to invest and get down on the ground to build the investee companies for the return targets.
“What we are trying to do is bring best practices from overseas to Malaysia and to raise the standard in each sector. Like in CTOS, credit reporting service, we bring in credit scoring, which has never been done before in Malaysia,” he shared.
In terms of positioning Creador as a cornerstone investor for initial public offerings (IPOs), Vasudevan said the firm has also interest in deals as such, pointing out that it had wanted to pick a substantial stake in the upcoming listing of convenience store chain, Bison Consolidated Bhd.
“We did offer to be a big investor, we got a smaller stake. We are very interested in being a significant shareholder, ideally (to be a shareholder with) at least 10 per cent of the company, but (Bison’s IPO) is doing very well and they only gave us 2.2 per cent of the,” he said.
Bison Consolidates, en route to list on Bursa Malaysia this March 29, is oversubscribed by 6.94 times. The IPO is raising some MYR89 million through the offer of 80.6 million IPO shares at MYR1.10.
This is the second of such investment from Creador, in the convenience store retail segment. The first being 7-Eleven, which is owned by Berjaya Corporation.
The PE firm has a 45-headcount team, armed with consultants and former chief executives who work on identifying ways to grow the businesses of Creador’s investee companies faster, at lower costs.