Abraaj partners with BMA to raise $300m for Pakistan

The Dubai-based firm has launched its third fund this year, teaming up with portfolio company BMA Capital to raise what is says is the largest buyout fund focused on Pakistan.

Abraaj Capital has launched its third fund so far this year. The Dubai-based private equity firm has partnered with Pakistan investor BMA Capital, a portfolio company of Abraaj Capital, to launch a $300 million (€233 million) buyout fund targeted at Pakistan.

According to Abraaj Capital, the Abraaj BMA Pakistan Buyout Fund is the largest private equity fund focused on investments in Pakistan. The vehicle, which is targeting an IRR of 30 percent, will pursue a broad-based rather than sector-specific strategy.

Arif Naqvi, Abraaj Capital’s CEO and vice chairman, said in a statement: “Pakistan’s economy is the second fastest growing economy in Asia; the country has achieved an impressive 8.4 percent growth in GDP in 2005 with relatively low but rapidly increasing levels of debt financing, exports and FDI creating significant economic upside.”

According to Farrukh Khan, CEO of BMA Capital, Pakistan has completed $4.7 billion of privatizations in the last three years, with an estimated current pipeline of over $10 billion. He also noted that the region had seen a “number of consolidation opportunities in fragmented industries”, such as insurance, banking, materials, power, automotive parts, telecoms and textiles.

Naqvi added that, through the use of co-investments and leverage, the vehicle would be able to facilitate investments of up to $1 billion across a range of industries. The new fund has already attracted $50 million of deals across various sectors, according to a report from Abraaj Capital.

According to the report, “Pakistan has been virtually overlooked by international and regional PE players with an estimated $100 million of PE funds under management targeted to investments in Pakistan, compared to an estimated $30 billion for MENA and up to $8 billion for India”.

Abraaj Capital acquired a 50 percent stake in BMA Capital Management, a Pakistan-based financial securities firm, in July 2004. The $7 million investment was made through the Abraaj Buyout Fund and was its first investment in the country.

The Abraaj BMA Pakistan Buyout Fund is Abraaj Capital’s third fund launch so far this year. Earlier this month, the firm entered into a joint venture with Deutsche Bank and Ithmar Bank to raise a $2 billion Shariah-compliant alternative investment fund, Infrastructure and Growth Capital Fund, aimed at taking stakes in privatisations, buyouts and restructurings in the Middle East region.

In March, Abraaj Capital announced a joint venture with Indian private equity firm Sabre Capital to raise a $250 million vehicle focused on investments in India, Asia’s fourth largest economy.

Abraaj Capital, which closed its second buyout fund, ABOF II, on $500 million last December, currently has $1.5 billion under management and specialises in buyouts, strategic minority stakes in public enterprises and real estate investments within the Middle East-North Africa region.