opportunistic investments

Al Anwar Holdings sets sight on ‘opportunistic investments’ Vinod Kumar PK Sunday, August 16, 2009 12:28:07 AM Oman Time MUSCAT — Al Anwar Holdings, an investment holding company that is publicly traded and listed on the Muscat Securities Market (MSM), plans to be a leading private equity investment company in the Middle East with primary focus on financial services. The company was formed in December 1994 with a mandate to identify, promote and participate in equity of business ventures. Originally promoted for investments in industrial ventures, it has invested in the power sector, oil and gas, glass and paints, computer stationery, investment castings, construction and infrastructure; and packaging catering to the FMCG industry. The business focus and business model both took a shift since 2006 after Krishna Kumar Gupta joined the company as the CEO.
Since then Al Anwar’s primary focus has been in financial services sector including insurance. The company’s business model is now of a private equity firm. “In 2006, we set our mission to see that our investments grew by 100 per cent in five years to RO20 million with 60 per cent being generated from the financial services sector including insurance. We achieved this difficult looking target when set in just two years,” Gupta told Times of Oman. Gupta is a double graduate in science and law and a postgraduate in Management Science from Symbiosis, Pune and has over three decades of experience in commercial banking, investment banking and electronic industries. He began
his career with State Bank of India as a probationary officer and rose to senior management cadre in less than 12 years. He was deputed to SBI Capital Markets, the investment-banking arm of SBI to head its Treasury and Project Appraisals departments. Prior to joining Al Anwar Holdings, he was heading his own investment-banking outfit, Kore Consultant. In an exclusive interview with Times of Oman Gupta speaks in detail about the group, its activities, growth, strategy and future plans. Excerpts: Tell us about the group’s activities, its structure and performance? AAH was set up primarily to make investments and to participate in the equity of new and existing industrial, trading and services companies in various sectors of the economy. After becoming the company’s CEO in 2006 the first thing I did was to re-position the company and modified its business model to that of a private equity investment company with primary focus on financial services sector including insurance. Then we formulated a well-defined investment policy that specified maximum allocation of available funds in the equities of companies from select industries. We also allocated a small portion of the available fund amounting to RO500,000 for trading portfolio of liquid investments. In order to diversify the risk and to take full advantage of emerging markets like the GCC, India, China and Latin America, we included in our policy a geographical dispersion of investments with primary focus on financial services sector. The investments made in these sectors were strategic in nature and normally made for long term. How has the company performed since then? In March 2009 you reported full year performance. Are you happy with the growth? Al Anwar reported a net consolidated profit attributable to the shareholders of the parent company of RO2.699 million for the year ended March 31, 2009 as against a net consolidated profit of RO4.331 million for the year ended March 31, 2008. Of this, about 78 per cent of the net profit of RO2.096 million was generated out of divestment of 28.71 per cent shareholding in Voltamp Energy. Also during the year 2008-09, the company increased its share capital from RO8.855 million to RO10 million through stock dividend. I am happy to say that despite turbulent market conditions and depressed financial markets across the globe, AAH posted a profit during 2008-09, which is lower by 34 per cent as compared to 2007-08. The reason for this was mainly due to the mark-to-market losses on account of down turn on MSM and the Indian stock markets, lowering the share of profits of Voltamp Energy since it could no longer be treated as a subsidiary after diluting the company’s stake post-IPO, and sharing of hedging losses in case of National Aluminium Products Co. How have GCC economies performed during the financial crisis? We are now living in a globalised world and the downturn in the US and Europe has also been felt here. The economies here, including Oman, are dependent on hydrocarbons including oil. Crude price fluctuated widely last year dropping down steeply in the later part of the year from the peak of $147 a barrel in July 2008. As a result of the financial crisis, there was a decrease in credit, which affected the companies and financial institutions during the last two quarters of 2008. However, Oman continued with its conservative approach and robust regulations as a result of which it weathered the storm created by the global financial crisis recording 40 per cent growth in nominal GDP and a budget surplus of RO3.5 billion compared with a projected deficit of RO400 million. While Omani banks remained resilient to the global financial crisis and recorded robust growth, liquidity with them remained questionable despite Central Bank of Oman taking steps for improving liquidity by changing reserve ratio and loans-to-deposit ratio. Credit availability was very tardy during the last quarter of 2008 even by the best of the companies. However, credit delivery by banks is appearing to be improving of late. Did global meltdown affect the bottom line of the group? Al Anwar was not severely affected by the global crisis as a result of prudent business strategies; risk mitigating practices and extensive monitoring of investee companies. Investments were continuously reviewed and external environment was scanned for selecting the most opportune time for divestment of matured investments. During the first quarter of 2008 the partial divestment of Voltamp Energy helped us in generating funds for better yielding investments in line with our strategy thereby recording good profits. Do you see ample investment opportunities at this stage? After being battered in 2008, the global financial system is now showing signs of recovery in the current year. The relief package offered by many countries to provide liquidity has started showing signs of desired results. The revival of crude oil prices by 50 per cent from its bottom has given a sigh of relief for economies in the GCC. The crude price forecast for the year at an average of above $60 appears plausible as it is currently hovering over $70. Also, all the GCC equity markets have shown signs of reversal of trend since March 2009. The revival of economies in the region and the world offers us great investment opportunity. Have you taken any steps to reduce the impact of various threats? Yes, the company has taken effective steps already to reduce the impact of various threats by investing in countries that are not oil dependent, preparing for competition by creating a niche in insurance field and by re-aligning the investment portfolio with a major focus on financial services sector. Which were the key investments you made last year? During the year 2008-09 two companies — Al Anwar Real Estate SAOC and Al Anwar Securities SAOC — were promoted by AAH. The real estate firm was promoted with other shareholders with an authorised capital of RO10 million. However, due to the sudden change in the fortunes of the real estate sector, we decided not to go ahead with the incorporation of the company and the capital raised was refunded in full to the promoters. The company is still holding to the plot of land for which it is exploring various other options. Al Anwar Securities, which was a wholly owned subsidiary of ours, had planned to obtain a licence from the CMA to carry out financial services business. But with the economic slowdown the business for financial services has shrunk, as such the company is now exploring other options. What are the main challenges for companies like yours? Although there are several challenges, I think the private equity companies should focus and conduct detailed analysis before venturing out. The important thing is to know exactly when to enter into a new investment or correspondingly know when to make divestment. This has to be based on proper research and should be done professionally. What expansion plans have you formulated for this year? As a private equity company we always have to make some divestments as well as new investments every year. Then only can the company give profits to its shareholders. As a result you will always find something that is either divested or invested year after year. Currently there is still a lot of opportunity in Oman and in the region and I am looking out for those opportunities. We started with investment in Saudi Arabia, which we later swapped to Bahrain. In fact, whenever and wherever there is an opportunity we will go to those countries and invest.