** Diversified alternative asset manager HMC Capital shares HMC.AX fall as much as 5.5% to A$3.705, their lowest level since December 19

** KKR-managed KKR.N funds will invest up to A$603 million ($423.73 million) in preferred equity in HMC's Energy Transition Platform

** Morgan Stanley notes deal reduces FY26 EPS downgrade risk, eases balance sheet pressure

** However, MS flags that the deal is not structured in a typical way where HMC would earn management and development fees

** Highlights JV may need to repay KKR A$900 mln-1 bln at term end; KKR retains 20-35% equity stake even after return of, and return on, its investment

** HMC down 5.1% YTD

($1 = 1.4231 Australian dollars)

(Reporting by Shruti Agarwal in Bengaluru)

((Shruti.Agarwal@thomsonreuters.com))