Daiwa PI Partners, the principle investment arm of Daiwa Securities Group, is seeking to invest $50 million in the form of equity investments in Myanmar enterprises over the next two years, as part of their strategy to tap opportunities in the emerging markets of Asia, said a top executive of the firm.
Daiwa PI Partners’ funds are derived from Daiwa Securities Group’s proprietary capital which do not pose a capital or maturity constraint. Daiwa Group is engaged in asset classes including private equity, non-performing loan, energy investments and managing investment funds,
Daiwa PI Partners, which started looking at Myanmar opportunities since last 2016, has an accumulated private equity investment record of 350 billion Yen ($3.1 billion) in Japan and overseas (Asia).
Daiwa PI’s maiden investment in Myanmar was into internet service provider startup, Frontiir, in which it injected $6.26 million in July this year for a significant minority stake. Apart from the funding, Daiwa PI also supports the startup with financial management, corporate governance and networking with Japanese companies. Daiwa has not made a follow-on investment in the startup yet but may consider it based on business expansion needs.
Without having a constraint of capital, Daiwa is actively in search for possible investible companies in Myanmar.
The second investment is likely to be sealed before the end of 2017 as the firm is currently in the process of due diligence for three to four companies, said Kazuyoshi Mizukoshi, managing director of the International Investment Department of Daiwa PI Partners Co Ltd.
“We are pretty much actively sourcing the next investment opportunities in the area of communications, finance and online business and consumer space,” said Mizukoshi during an interaction with DEALSTREETASIA.
The firm is keen to look at sectors including infrastructure, consumer-focussed businesses and finance companies such as microlenders.
The majority of private equity investments of Daiwa PI Partners are concentrated in Japan where it conducts buyout or significant minority transactions from the time it was set up in 2000.
However, their geographical spread has now diversified to cover Southeast Asian markets like Myanmar, Vietnam and, to some extent, Indonesia and Taiwan.
“Rather than looking at Singapore or Hong Kong that are already developed, we are much more focused on this emerging countries like Myanmar and Vietnam. For us, it is more interesting,“ he said.
Daiwa PI typically takes a significant minority stake in the investee companies (about 10 to 20 per cent stake). For now, the firm is waiting for the amendment to the Companies Act that would make it easier for foreign entities to invest in Myanmar.
“Our comfortable ticket size is around $5 million-$10 million. We can also consider a smaller size of about $2-3 million,” said Mizukoshi.
As countries like Myanmar present an early stage opportunity, the private equity scene in the frontier market has not seen many global PE majors tap the region yet.
“We think there is a good chance for mid-sized players like us,” said Mizukoshi.
For Daiwa PI Partners too, Myanmar poses to be longer-term growth story.
“We prepare to take a more longer investment horizon than other countries. (For PE investment) Myanmar, we think it would be 5 to 8 years maybe,” he said.
On a macro view, Daiwa PI Partners’ could invest up to $100 million per deal (and above upon consideration) mainly in Japan and other Asian countries for both equity or quasi equity investments. For debt, they can put in up to $100 million per deal, currently investing in Japan, U.K. and Australia. Daiwa PI Partners’ energy investment is only made in Japan.
Some of Daiwa PI’s global investments include air cargo transport firm, Noi Bai Cargo Terminal Service JSC from Vietnam, drug discovery and development company, Original BioMedicals Co Ltd from Taiwan and Pt. Saratoga Investama Sedaya tbk, a principal private equity investor in Indonesia.