Southeast Asian private equity firm Northstar Group is targeting an $800 million final close of its fifth fund — Northstar Equity Partner V Limited (Northstar V) — by the end of the year, co-chief investment officer Tan Choon Hong told DealStreetAsia.
Northstar had raised about a third of the target by April 2020, the firm revealed.
The fifth fund will target growth-stage companies predominantly in Indonesia, while also keeping an eye on opportunities in other Southeast Asian markets such as Singapore and Vietnam. Northstar V will focus on investments in key growth areas including consumer goods, financial services, the digital economy, and recovery from the COVID-19 pandemic, the firm said.
Singapore-incorporated Northstar, which mostly invests in Indonesia, has already started deploying from the fifth fund. In December 2020, the investment firm, along with American PE firm TPG, acquired an 80% stake in the dairy firm PT Greenfields Indonesia from Singapore’s Japfa for $236 million.
“Greenfields is in the process of expanding its production capacity and rolling out new dairy products. We see huge potential for the growth of this business as consumers are increasingly recognising the health benefits of high-quality dairy products,” Choon Hong said.
“There are two key pillars that businesses are benefiting from in Indonesia — a rapidly expanding middle class and rising consumption. In time, we expect to also see this happen in other emerging Southeast Asian countries,” he added.
Northstar has also made several undisclosed investments from the fifth fund.
Hong said the fifth fund is an extension of its predecessor fund, which was focused on financial services and tech-enabled consumer companies such as ride-hailing platform Gojek, Vietnamese e-commerce platform Tiki, coworking space provider UPGen, and edtech startup Topica.
Northstar typically cuts cheques with a minimum ticket size of $20 million. With the fifth fund, the firm is ready to cut smaller cheques for tech companies to ensure it can capture opportunities at an earlier stage, the firm’s co-founder and managing partner Patrick Walujo told DealStreetAsia recently.
“We can go as early as Series A on a case-by-case basis. But when we invest, we hope that — even if we inject a small amount — we can support the company when it grows,” Walujo said.
With the first close of Northstar V in the first half of 2020, the group now has over $2 billion in assets under management (AUM).
Currently, digital companies established in the first wave — especially in sectors like transport and logistics, e-commerce, and those which evolved to be super apps — are going through an inflexion point, having become relatively mature and big. Yet, Walujo expects to see a second wave, where companies in the healthtech, edtech, agritech, and SaaS sectors will develop, and become the areas of focus for the fifth fund within the “digital economy” sector.
Last year, Northstar made investments in the Indonesian edtech firm Zenius and aquaculture firm eFishery. It also led a $130 million funding round for Vietnamese online marketplace Tiki in June 2020.
Indonesian ride-hailing and payments decacorn Gojek, a notable Northstar portfolio firm, is believed to be inching closer to accessing the public markets. This has sparked interest in Southeast Asian startups from global investors.
Northstar was an early investor in Gojek having first invested in the company from its 2014 vintage fourth fund, Northstar Equity Partners IV. The fund had secured a final close at around $810 million in 2015. As DealStreetAsia had reported, Northstar completed a partial exit from its investment in the ride-hailing unicorn in 2019 divesting about a fourth of its stake to generate high returns for its limited partners (LPs).
According to data from the University of Texas/Texas A&M Investment Management Company (UTIMCO), as of February 2021, the Northstar Equity Partners 4 Limited fund had generated an internal rate of return (IRR) of 11.34%. The group’s second and third fund had recorded 0.35% and -2.55% IRR, respectively.
Northstar has declined to comment regarding the IRRs.
Northstar is said to be weighing a stake sale in the listed telecom tower company Centratama Telekomunikasi Indonesia, DealStreetAsia had reported in 2019. The PE firm holds a 38.8% stake in Centratama Telekomunikasi through an SPV, Clover Universal Enterprise, which is under Northstar Equity Partners III.
The company is also reported to be eyeing an exit from mining contractor PT Delta Dunia Makmur Tbk, as the commodities sector is no longer a focus area for the firm. Northstar holds a 37.86% stake in Delta Dunia Makmur.
“Northstar’s early funds invested in a mix of businesses related to consumers, financial services, and natural resources. Our fourth and fifth funds continue to focus on consumers and financial services, but we have substituted natural resources with digital businesses. This revised investment strategy has delivered positive returns for our fourth fund and we are optimistic that it will do so for our fifth fund as well.”
Founded by Walujo, a former Goldman Sachs banker, and former PricewaterhouseCoopers executive Glenn Sugita in 2003, Northstar started investing in the private markets in 2006. With TPG among its shareholders, the firm has LPs that include global sovereign wealth funds, pension funds, endowments, family offices, and other institutional investors.
Ardi Wirdana contributed to this story.