Jio's telco-digital combination was key attraction: Sanjay Nayar, KKR India CEO

KKR decided to bet on Jio Platform because of its unique combination of a profitable, market-leading telco business with a number of high-growth digital B2C and B2B businesses built on top, the US private equity firm's India CEO Sanjay Nayar and its Asia head of technology Lucian Schönefelder told ET in an interview. Excerpts:

What makes Jio an attractive bet?
Schönefelder: Jio is a unique combination of a profitable, market leading telco business with a number of high-growth digital B2C and B2B businesses built on top. We haven't seen such a combination anywhere else in the US or Europe, and it was certainly one of the key attractions for us to invest. Over the last couple of years, Jio really built one of the most modern, scalable and cost-efficient telecom infrastructures in the world. Even though Jio is a telco business at its core, it is built on best-in-class technology that has allowed them to ramp up and scale very efficiently. What gets us really excited is the potential that this platform has to distribute digital services to consumers through the MyJio app. We think there is a lot of pent-up consumer demand for a lot of digital services and that India is really at an inflection point in that regard. The other thing that got us really excited about this opportunity, and which can easily be overlooked, is the B2B opportunity that is ahead of Jio. If you look at IT software spending as a percentage of GDP, India stands roughly at 0.20% of GDP compared to the US at around 1.1% of GDP and Europe at 0.6%. There are all sorts of B2B software services that we think Jio can cross-sell together with its B2B connectivity services.


Nayar: From a macro standpoint, what attracted us is that India is digitising rapidly, and Indian consumers want to consume content and other digital services at an affordable price point, which is now achievable since data prices have fallen. Secondly, Jio’s compelling entrepreneurial vision. I think the digitised offering that they are putting together is very impressive, and is a winner all the way.

Which KKR pool of capital are you using for investing?
Nayar: This is coming from our Asia private equity and growth technology funds.

Are you going to invest in more consumer internet companies in India?
Schönefelder: KKR has made a number of very successful B2C investments. If we look in our Asian portfolio, ByteDance and Gojek are B2C companies. We’ve made an investment in a Chinese company called Huohua, which is an online education business, and also B2C. We invested in Trainline in the UK, which is the largest B2C online marketplace for rail tickets globally, which we successfully listed in the UK. So, we’ve seen quite a lot of momentum in our B2C investing activities. That said, what we've historically stayed away from - and what we have got to continue staying away from - are really lowmargin business models with challenging economics. We’re more attracted to businesses like Byte-Dance and Gojek, which are interesting because they have the ability to achieve attractive economics.