Arif Naqvi: Countdown to 2008

Arif Naqvi, Abraaj Capital's chief executive, is looking forward to 2008 and continuing to invest in the development of the Middle East, North Africa and South Asia region’s basic building blocks.

Arif Naqvi

 “In the coming year the good news is very good and the potentially less good news we can easily live with.

The good news is that there is a great appetite throughout the global finance community for investment into MENASA’s compelling story. The scope of interest has expanded beyond regional high net worth individuals to include international pension funds, university endowments, insurance companies and financial institutions.

There is also the continued growth of local governments’ enthusiasm for private sector participation in the development of infrastructure industries integral to taking the region to the next level that is creating an environment conducive to the growth of our asset class.

Deal flow will remain unabated as sound macro economic fundamentals, social and economic reforms and high levels of liquidity continue in 2008, providing both entrepreneurs and corporates with ample expansion opportunities.

Family businesses in the Gulf alone account for $500 billion of assets under management, and a substantial number of these will seek private equity partners as a means to corporatise and enhance their governance systems before raising capital from the growing regional capital markets.

In 2008 we also  expect to see continued pre IPO offerings as large state owned entities follow the example of Dubai Ports World’s recent listing on the DIFX. 

The potentially less good news is that the number of new participants in the industry and the entry of foreign players in the market could bid up the price of assets and talent. However we remain confident in our access to proprietary deal flow and the commitment of our team.

Abraaj will continue to tap into the soft and hard infrastructure requirements for a growing population of 1.8 billion people in MENASA. 

In 2008 we expect to finish deploying the region’s largest private equity fund to date, our $2 billion Infrastructure and Growth Capital Fund, which will have been invested in a record two year time frame.” Arif Naqvi, vice chairman and chief executive officer of Abraaj Capital.

2007 was a momentous year for Abraaj. The Abraaj Buyout fund continued its run of successful exit with Septech Holdings generating an IRR of 39 percent.  The firm expects to exit the fund’s remaining portfolio by 2008.

The Abraaj Real Estate Fund recently sold its stake in Arabtec PJCS at an IRR of 116 percent returning 12 times the invested capital and nearly half the original capital of the fund while the remaining assets continue to perform very well.

The Abraaj Special Opportunities Fund II is now fully invested and is up by 38 percent, a far superior to the performance of the regional market indices.

In November of this year, Abraaj Capital and Dubai Financial Group, the financial holding company of Dubai Group agreed a transaction for DFG to acquire 100 percent of Abraaj Egypt and Abraaj SPV 26, which collectively own a 24.62 percent stake in Cairo-based bank EFG-Hermes for a total consideration of approximately $1.1 billion. This transaction generated an IRR of 98 percent for Abraaj Capital Holdings.

The second close of the shari’a compliant Infrastructure and Growth Capital Fund on total commitments of $1.7 billion as of 30 September 2007 made it the largest fund focused on the MENASA region.  The fund is expected to be capped at $2 billion upon final closing before the end of 2007. Abraaj has already made five investments for the fund.