Category Archives: Business

At-Tahur’s road to IPO begins, book-building set to close on 26th June

29 Friday Jun 2018

Posted by in Business, Markets, Pakistan

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By: Mohammad Farooq

LAHORE: The registration for book-building of At-Tahur’s IPO on the Pakistan Stock Exchange commenced on June 20th and is set to end on 26th of this month.

At-Tahur is issuing 36.7 million shares with 75 percent for book building and remaining 25 percent for retail investors at a floor price of Rs20 per share.

According to At-Tahur’s IPO prospectus “The issue is being made through the book building process at a floor price of Rs20.00 per share (including a premium of Rs10.00 per share) with an upper limit of 40 percent above the floor price.

The bidders shall be allowed to place bids for hundred percent (100 percent) of the issue size and the strike price shall be the price at which the hundred percent (100 percent) of the issue is subscribed.”

Also, bidding period dates commence from 25th June and end on June 26th at 5:00 pm. And the date of public subscription begins on 2nd July at 9 am and concludes on the 3rd of July at 5 pm.

The unsubscribed retail portion would be given to book building bidders and the funds raised from the IPO will be utilized to raise the plant, milk capacity and herd size.

The total funding requirement of At-Tahur amounts to Rs945 million, from which 77.6 per cent i.e. over Rs730 million proceeds will come from the IPO and the remainder will comprise of debt financing.

Arif Habib is acting as the consultant to offer for At-Tahur’s IPO at the PSX.

The company’s chief executive officer (CEO) is Rasikh Elahi, a law graduate from University of Buckingham, United Kingdom and the son of ex-Punjab Chief Minister and former deputy PM Chaudhary Pervaiz Elahi and the brother of Moonis Elahi.

He has been the CEO since the company’s inception in 2007.

In a comment to Profit, Maha Jafer Butt, Director Research Capital Stake said “At-Tahur shall be the first dairy company operating in the niche segment of production and sale of pasteurized Milk to go public.

The product portfolio of other listed companies including Fauji Foods Limited and Engro Foods Limited is more focused on the UHT treated milk production and include other food items also.”

“With increased health awareness and doubts over the quality of milk loose milk, demand for At Tahur is expected to rise. A review of the company’s past financials demonstrates sales expanding with a CAGR 28% (as mentioned in the prospectus).

According to the prospectus, funds from the IPO shall be utilized in expanding into the untapped market of Karachi. Karachi being a large city with a literacy rate higher than many others may prove to bring in good demand. Other uses of the fund include increased herd size, expansion of the plant and farm capacity,” she said.

At-Tahur commenced operations more than a decade ago and is a key player in the pasteurized dairy segment of Pakistan. Its principal activity is to run a dairy farm for the production and processing of milk and dairy products.

Its major proficiency includes a retail network with a footprint of over 3,000 stores across the country which includes a vertically integrated distribution network, modern and automated dairy farm and a high-quality product range.

The company’s Prema milk brand holds the biggest market share in the pasteurized segment according to the Nielsen Retail Audit in March 2018.

In April, Dawn reported entities looking for a potential initial public offering (IPO) on the Pakistan Stock Exchange had declined in the last year or so.

At KSE-100 index’s zenith in late May last year, when it touched a record high of 52,876 points over 17 entities had applied for listing according to the daily quotation sheet of the exchange.

At that juncture, Dalda Foods, Inbox Technologies Limited and a variety of funds in Gold Fund; Energy Fund; Capital Protected Fund; Active Allocation Fund; Strategic Allocation Fund; Treasury Fund; Prosperity Planning and privately placed sukuk had sought to be listed on the PSX.

However, in 2018 as per the quotation sheet of the exchange, only 7 companies are seeking a listing on the stock exchange which includes, Inbox Technologies Limited, Unicol Limited, At-Tahur Limited, Liberty Power Tech Ltd, TPL Life Insurance Ltd, Hira Terry Mills Ltd and Dalda Foods.

This will be the third IPO of the year following Matco Foods and AGP Pharmaceutical’s listing on the bourse in January and February respectively.

Published in Profit by Pakistan Today, June 24th. 

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Arif Naqvi in a message to friends & employees shares his experiences at Abraaj

29 Friday Jun 2018

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By: Mohammad Farooq

BACKGROUND

The Abraaj Group founder Arif Naqvi since its inception in Dubai in 2002 led the company to stardom and converted it into one of the largest emerging market private equity firm in the Middle East and North Africa.

At end of June 2017, Abraaj had over 200 offices scattered in five international hubs which include Singapore, Istanbul, Nairobi, Mexico City and Dubai.

During its peak, the company’s investments ranged from healthcare and education, financial services, consumer goods and services, industrials and materials and logistics.

In Pakistan, Abraaj owned K-Electric which it acquired in 2008 and then divested to Shanghai Electric Power Company in second-half of 2016 for $1.77 billion.

The K-Electric deal has faced numerous delays because of tariff disputes and other issues which blocked the release of funds.

Abraaj expects it will soon complete the disposal of its holding in K-Electric.

However, the journey of smashing success hit roadblocks in February when the company was accused by its leading investors; the Bill and Melinda Gates Foundation, the World Bank’s International Finance Corporation (IFC) unit, and government-backed development finance organisation’s CDC Group PLC of misusing $200 million from its $1 billion healthcare funds intended for use in developing economies of Pakistan, India and Nigeria.

The group was broken into Abraaj Investment Management Ltd (AIML) and Abraaj Holdings in late February.

An internal audit conducted by KPMG gave a clean chit to the company but Abraaj was compelled to return capital to a new fund and stopped fresh investments in wake of organizational restructuring and geared up to introduce new robust internal controls.

In mid-April, reports surfaced the company had hired the services of big four accountancy firm Deloitte to investigate its business, which included its $1 billion healthcare fund which had been the centre of controversy since February.

The leading investors had voiced concerns over the hurriedly conducted audit by KPMG of Abraaj’s healthcare fund and demanded another audit be conducted to verify if there had been any misuse of funds.

Also, KPMG was said to be undertaking an internal review into its audits of the world’s largest emerging private equity house.

KPMG forms part of the “big four” accountancy and audit firms globally and its UK branch is investigating its Middle East division for any potential irregularities in the valuation of assets of Abraaj and its linked entities.

Since then, Abraaj has been on a downward spiral and faced a litany of issues pertaining to its investment arm, business practices and various other problems that have culminated in it filing for provisional liquidation.

On Monday, the court in the Cayman Islands in response to a petition filed by Abraaj appointed PwC as provisional liquidator of Abraaj Holdings and Deloitte as provisional liquidator of Abraaj Investment Management Limited.

Arif Naqvi’s message to “friends of Abraaj” and employees

Arif Naqvi in a message sent to “friends of Abraaj” and employees last week said:

“As you have seen in the press these last few months have been extremely difficult for all of us at Abraaj. As an important stakeholder in our ecosystem, I wanted to bring you up to date personally on where we stand.”

Naqvi shared his experience of founding Abraaj and how it grew over a period of time:

“Let me first state that when I founded Abraaj in Dubai in 2002, I never thought this business would end up spanning the globe to become a leading investor in growth markets. On the other hand, I did see the opportunity to create a company that could unlock value in fast-growing but often overlooked, markets whilst delivering compelling returns for investors.

Giving insight into his company’s journey, Naqvi said “As I look back, I can see Abraaj’s track record as a testament to this mission and I hope you can too. Together with many talented professionals, we built a global business and successfully deployed private capital in some of the fastest growing regions of the world and in sectors that are transformative for the economy and the middle-class community that powers it – be that in education, healthcare, financial services, or infrastructure. We have created jobs, built soft and hard infrastructure and expanded life-sustaining services to reach a multitude of individuals and families.”

Addressing his employees, he added: “As we deployed and returned capital to our investors we also gave back to the communities that we touched through our time, partnerships and corporate philanthropy – many Abraaj employees participated in mentoring entrepreneurs, speaking in classrooms, or raising funds for special causes – as we did most recently for young Afghan kids needing heart surgery.

Talking about his experiences of working alongside various NGO’s and entities at Abraaj, Naqvi elaborated “We worked alongside amazing NGO’s and organizations helping them scale their delivery systems and guiding their progress into our markets for maximum impact in the spheres of employment, entrepreneurship, arts and innovation and healthcare. These actions did not meet unanimous support internally in Abraaj – yet this was an element of our culture that I was most proud of and never compromised on – we have touched the lives of hundreds of thousands of less fortunate people along our journey.”

He explained about the fallback of the accusations which roiled Abraaj in February: “Earlier this year gaps in our internal governance and operating procedures were discovered and as a result, we continue to navigate the business through very challenging circumstances. As you can imagine, the negative reports on Abraaj, many of which are out of context, have significantly damaged our Firm’s value and undermined the business at different points over the course of the last four months. Moreover, the way in which these factors (many of which were private) have all emerged as a matter of public record, has only aided to our loss of value.”

And he shared details about the interest expressed by various companies in buying its investment business: “In parallel, we have also received strong interest from potential acquirers for the operations of our fund management business, Abraaj Investment Management Limited (AIML). Talks are at an advanced stage and we continue to work together to achieve the most effective outcome for the firm.

(At the time of filing this report, Abraaj had divested some of the key funds in its investment business to Colony Northstar for an undisclosed price)

Naqvi shared the impact these allegations had on its employees and tendered an apology: “The recent events have caused Abraaj employees and our stakeholders’ undeniable pain and turbulence for which I apologize unreservedly.

Furthermore, explaining the media coverage over the last few months, Naqvi said “Despite all the rumours and briefings against us, and me personally, to my knowledge there was no intentional wrongdoing. In retrospect, however, I think things could have been done differently, and we might not be where we are today.”

He affirmed his belief in Abraaj and told “It is my strong belief that at its core, Abraaj has a deep team of experienced leaders and talented employees, many of whom have grown through the ranks over the last 16 years. There is great potential to take this platform forwards.”

He offered his gratitude to those who had worked with him and had been a part of the journey at Abraaj “I want to salute all those who have been part of this journey with me – and you are one of those. It has been a privilege for my colleagues and to work with you and your organizations in trying to make this world a better place. I certainly plan on continuing this journey and hope that our paths cross again in the future.”

Published in Profit by Pakistan Today, June 21st 2018.

How Arif Naqvi’s fall from grace put Abraaj on brink of bankruptcy

29 Friday Jun 2018

Posted by in Audit & Assurance, Business, Uncategorized

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By: Mohammad Farooq

LAHORE: The rapid descent of Abraaj founder Arif Naqvi and the wave of accusations over misuse of healthcare funds by its investors has put the company on the brink of bankruptcy.

Naqvi, who once heralded places like the World Economic Forum in Davos and rubbed shoulders with people like Microsoft founder Bill Gates and proselytized good deeds and money making, has seen his reputation soiled.

The problems of Naqvi have been compounded by the delay in the sale of Pakistani private power utility K-Electric have contributed to a liquidity crisis for Abraaj.

Naqvi, who set up Dubai-based Abraaj in 2002, in February passed the reins of the fund management arm to two new co-chief executives so he could concentrate on managing the parent company, Abraaj Holdings.

Investors in May had called Naqvi to further scale back his involvement in the group amid a row over misuse of funds.

Naqvi remains the single largest shareholder in Abraaj Holdings and sits on its board. He also remains a non-executive member of the Global Investment Committee, which according to Abraaj’s website, is responsible for investment and divestment decisions across funds and provides guidance on transactions.

However, critics allege Mr Naqvi of being arrogant, delaying cost cutting until it was too late and his inability to calm the increasing turbulence, reported Financial Times.

In a statement to FT, Arif Naqvi acknowledging the mistakes said he was intent on reaching a restructuring deal which would shield jobs and allow to pay back debts of Abraaj.

He added “I am working day and night to make sure that no one loses money, and everyone gets back what they are entitled to. I don’t care about self-interest — my intention is to make sure everyone else gets their money returned.”

Known to be a generous philanthropist, Mr Naqvi studied at the prestigious institute London School of Economics (LSE).

Mr Naqvi has made donations to LSE and Abraaj has been a leading promoter of Middle Eastern art and has financed a prize and glitzy fair, said FT.

In February this year, Abraaj was roiled by accusations over misuse of investor funds in a $1 billion health-care fund and had set ablaze a wave of unrest amongst its biggest investors.

Amongst Abraaj’s biggest investors is the World Bank, Melinda Gates Foundation, International Finance Corporation (IFC) and U.K based CDC Group had demanded an independent audit into the alleged misuse of funds.

The group was broken into Abraaj Investment Management Ltd (AIML) and Abraaj Holdings in late February.

However, an internal audit carried out by KPMG gave a clean chit to the company but Abraaj was compelled to return capital to a new fund and stopped fresh investments in wake of organizational restructuring and geared up to introduce new robust internal controls.

In mid-April, again reports surfaced the company had hired the services of big four accountancy firm Deloitte to investigate its business, which included its $1 billion healthcare fund which had been the centre of controversy since February.

The leading investors had voiced concerns over the hurriedly conducted audit by KPMG of Abraaj’s healthcare fund and demanded another audit be conducted to verify if there had been any misuse of funds.

Also, KPMG was said to be undertaking an internal review into its audits of the world’s largest emerging private equity house.

KPMG forms part of the “big four” accountancy and audit firms globally and its UK branch is investigating its Middle East division for any potential irregularities in the valuation of assets of Abraaj and its linked entities.

The sources refused to be identified due to the sensitive nature of the information and KPMG is also reevaluating its examination of Abraaj’s $1 billion healthcare fund which was given a clean chit in February.

In May, Wall Street Journal reported Chief Financial Officer (CFO) Bisher Barazi of Abraaj’s private equity fund and the unit’s chief operating officer Matthew McGuire quit merely months into their posts after being appointed after a major reshuffle at the company earlier this year.

Reuters reported on Wednesday about summary findings of a review carried out by Deloitte, which was hired by Abraaj to examine its business, showed that a cash shortage led the firm to “commingle” investor money with its own money.

Adding insult to injury, Kuwait’s Public Institution for Social Security on May 22 filed a case in a Cayman Islands court against Abraaj, claiming the company was unable to repay a $100 million loan and $7 million interest by the agreed date.

Earlier this month, the Kuwaiti fund declined to agree to a proposed debt freeze, complicating Abraaj’s efforts to sell its investment management business to New York-based Cerberus Capital Management.

And adding to Abraaj woes was news on Tuesday that another creditor Auctus had initiated legal proceedings in the Cayman Islands in which it sought restructuring of the private equity firm’s liabilities.

In a major development on Thursday, Abraaj filed a petition in the Cayman Islands asking the court to appoint PwC as provisional liquidators.

A press release issued by the company stated: “The appointment of provisional liquidators imposes a moratorium on the enforcement of all unsecured claims against the company, allowing time for a proposal to be put to creditors for the orderly restructuring of the company.”

Abraaj Group founder Arif Naqvi said, “This process marks the culmination of an extremely complex and challenging phase of negotiations and detailed planning. Since our differences with certain investors first came to light, we have worked exhaustively and transparently to investigate the matter and address their concerns, all the while ensuring our tremendous investment teams around the world continue to support the growth of our partner companies.”

He further added, “The intense public scrutiny and highly speculative rumours on these matters have put enormous stress on the Abraaj family of employees and partners, together with our investors and other stakeholders. We appreciate the support we have received from many who understand our circumstances and believe in the fundamental mission we have strived for the past 16 years to fulfil – investing for impact and driving growth. I want to thank our regulators, management teams, colleagues, lenders and advisors for working tirelessly to bring us to this point.”

“Keeping the interests of the Limited Partners in the Funds managed by Abraaj Investment Management Limited (AIML) during this turbulent period has been paramount. The fact that the approximately 50 companies in the current generation of funds have kept growing during these recent turbulent months demonstrates the resilience and quality of their management teams and our investment professionals.

“The process of court-supervised restructuring will take a few months. I will continue to support this orderly process and help ensure the best possible outcomes for all the stakeholders. The past four months have been humbling, exhausting and testing for us all but when I reflect on the past 16 years, I am proud of the positive impact that Abraaj has had on the markets and communities it serves”.

Published in Profit by Pakistan Today, June 14th 2018.