Malaysian private equity firm Creador is looking to announce two new deals in the next two months, completing the deployment of its fourth fund, its founder and CEO Brahmal Vasudevan said.
Creador is looking to invest in a quick-service restaurant player in India, while the other investment will be in a Malaysian firm. The first deal will be announced early this month, while the latter will be announced sometime in August. Vasudevan declined to provide further details.
Creador’s fourth fund had closed after securing around $580 million in 2019, exceeding its hard cap of $550 million.
The firm has launched its fifth fund in March and is expecting to secure its first close at $550 million by mid-July. “While we have seen a very strong demand and an extremely high repeat rate — about 90% of the capital is coming from existing investors — some of our investors have been quite busy and have asked us for a bit more time,” he added.
In April, Vasudevan told DealStreetAsia that the firm expects to secure $600 million in its first close. Targeting a size of around $680 million, the firm is expecting the final close in September-October, said Vasudevan.
He added that the fifth fund will be deployed starting September this year.
Last month, Creador picked up a 30% stake in Malaysia’s Loob Holding, which owns the Tealive bubble tea brand. The deal was reported to be 260 million ringgit ($62.5 million), valuing Loob at over 800 million ringgit ($192 million).
Vasudevan said the broad strategy for the fifth fund will be similar to its predecessors, focusing on Southeast Asia and India. Within Southeast Asia, the firm will be looking at opportunities in Malaysia, the Philippines, Indonesia, Vietnam, and Thailand.
In a previous interview with DealStreetAsia, Vasudevan said Creador is targeting a 25% return per annum for the fifth fund.
2021 is Creador’s busy year of exits. In April, the private equity firm announced that it has made a full exit from Gujarat-based drug manufacturer Corona Remedies. Through the exit, Creador booked a 3.7x return and an IRR of 32% in US dollar terms (or 4x returns and an IRR of 35% in Rupee terms).
In May, the firm fully exited its investment in Vietnam’s largest mobile device and consumer electronics retailer, Mobile World Group, by selling blocks of its shares to various funds. While he did not elaborate, Vasudevan said the return from the first investment it made in Vietnam was “modest”. Creador invested 994 billion dong ($43 million) in the company in 2018.
In January, Vasudevan mentioned that Creador is targeting to divest stakes from its six-year-old investment in the Indonesian lender Bank Index. Facing delays in regulatory processes, the divestment may take another six months to materialise.
Creador had, through its second fund, invested Rp290 billion ($20 million) for a 20% stake in Bank Index, which operates over 46 branches in Indonesia’s tier 1 and 2 cities. In 2020, Bank Index has total assets of Rp9.56 trillion, having channeled loans worth Rp6.85 trillion and collected third-party funds worth Rp7.85 trillion.
As reported in July, the firm is exiting 50% of its stake in credit reporting agency CTOS Digital Bhd, as the company gears up for a highly anticipated IPO.
Room for growth after CTOS listing
Creador currently holds an 80% stake in CTOS that it had acquired in two tranches – 70% for 215 million ringgit in September 2014, and later another 10% at about 45 million ringgit. Vasudevan said the firm initially only wanted to sell 25% of its stake but decided to upsize it to 50% following feedbacks.
CTOS has secured 23 cornerstone investors including Fidelity, Blackrock, Malaysia’s pension fund Employees Provident Fund and largest asset manager Permodalan Nasional Bhd.
The company is planning to launch a 1.2 billion ringgit IPO, the country’s largest listing this year. The listing would entail a public issue of 200 million new shares and an offer-for-sale allocation of 900 million existing shares, according to its prospectus. Based on the issue price of 1.10 ringgit per share, CTOS is valued at a market cap of 2.4 billion ringgit.
The company plans to use the IPO proceeds to repay bank borrowings, investments, and acquisitions, as well as defray listing fees and expenses.
Applications for CTOS’s IPO opened on June 30 and will be closed on July 6, 2021. It is expected to list on the Bursa Malaysia’s Main Market on July 19.
CTOS’s listing comes after Creador scored a partial exit in October last year from its retail portfolio company Mr D.I.Y. Group. It raised RM1.5 billion ($370 million) in Malaysia’s biggest IPO in the last three years.
Vasudevan said there is still plenty of room for growth for CTOS post-listing, unlike certain IPOs that have taken place in Malaysia of late. “Recently, a lot of IPOs in Malaysia were businesses that were made public once they have fully matured and did not have much growth left. Now, IPOs have become means for cashing out. I think this is one of the reasons why MR D.I.Y. was such a success story because the company was still growing 20% to 25% per year,” he added.
Back in 2014 when Creador invested in CTOS, it only sold credit information. The firm then helped to completely transform the company by bringing in new board members, opening up more positions in its management team, as well as driving the company to introduce new products and solutions.
“At that time, the sales team for the SME segment only consisted of five people. Today, the team consists of 160 sales personnel growing the 17,000 SMEs that are benefitting from the system. We got a lot of interest from parties looking to buy the company over the seven years period, but we ultimately decided to float the company to help develop the local bourse,” said Vasudevan.
CTOS has since almost tripled its topline from about 55 million ringgit ($13 million) to 140.5 million ringgit recorded in FY2020. In terms of revenue, the company represents a market share of 71.2%.
He believes CTOS still has many more years of growth, possibly at more than 15% next year. This will be done by expanding its key accounts aside from introducing new analytics, scoring tools as well as digital solutions to benefit from the launch of the upcoming digital banks in Malaysia.
On top of increasing the individual consumer base, CTOS is also actively expanding its SME customers, which Vasudevan described as a largely untapped market. The company is adding about 500 new SME customers every month.