Abraaj Capital, the Middle East’s largest private equity firm, is set to unveil more deal-making soon and plans a major push into India.
“In the next couple of months, we will call you guys again and again because we have a robust pipeline that is reaching completion,” founder and group chief executive Arif Naqvi told Reuters in an interview.
“We are in the process of completing investments – two or three investments,” said the 51-year-old Pakistani who is leading Abraaj’s drive to become an emerging market powerhouse.
“2012 is the fruit of efforts made in 2011.”
Dubai-based Abraaj, founded a decade ago, has raised $7 billion since its inception. It owns stakes in a range of Middle East companies including Orascom Construction, budget carrier Air Arabia, supermarket Spinneys and education group GEMS.
Funds managed by it have stakes in 35 firms across the region.
Abraaj has had a busy year already, led by a strategic deal to buy emerging markets-focused Aureos Capital. It is also investing $125 million in a Moroccan insurance holding firm and has tied up with the top shareholder of TransAtlantic Petroleum to buy the Canadian company’s oilfield services unit.
Naqvi, one of the region’s most influential financiers, said nearby India would be a focus region for investment.
“We have about six investments in India and we are looking to ramp that up massively. We have 10 people on the ground, which is 10 more than we had last year … India, to me, is a far more exciting market than China.”
“We have a $2 billion fund through which we invest private equity, and we have a couple of hundred million on the SME side dedicated to India. From the $2 billion fund the country limit at max is 25 percent … when you lever that up with debt and so on it becomes a very substantial number,” he said.
Buyout firms that invested billions of dollars during the Indian market’s boom years before the global financial crisis are widely expected to look for opportunities to cash in their holdings, with more stake sales anticipated in coming months.
Naqvi said exits by some Western private equity firms from Indian investments represented a buying opportunity, with Abraaj aided by the ramp up in its numbers on the ground.
“You cannot make investment decisions in Washington about an opportunity in India. Until you have got your hands dirty, until you have eaten daal, chawal, sabzi (pulses, rice and vegetable curry) in the street, how on earth can you make investment decisions?”
Ripe For Dealmaking
Naqvi, a graduate of the London School of Economics and Political Science and a former executive at Arthur Andersen and American Express, said the euphoria of the Arab Spring popular revolts had been replaced by realism.
He said the private sector would continue to be the engine of economic development, and there was a need for investment.
“Couple that with fact that valuations are at a very attractive level and people are no longer living in ga-ga land, where valuations were astronomically high, means that you are seeing some of the most compelling investment themes and opportunities of the decade.”
Naqvi said the time to complete transactions was longer because the universe of buyers had become smaller due to foreign investors’ heightened perception of political risk.
Naqvi, who plans for Abraaj to exit some ventures in the next 18 months, expected companies to stay away from initial public offerings (IPO).
“All of the markets have essentially started being driven by policy and not by fundamental analysis … because of that I feel that any sensible company will stay away and bide its time.”
Abraaj sold its stake in Turkish group Acibadem to Integrated Healthcare Holdings (IHH), a healthcare unit of Malaysian firm Khazanah Nasional late last year. The deal valued Acibadem at around $1.68 billion.