InterCap Capital manages 8 deals worth EGP 1.5 billion and plans to launch a startup fund
With the growth of acquisition and merger business and the increase of interest and support provided to the startup segment, InterCap Capital, which has taken the Egyptian market as a gateway to expand its activities in the region, aims to improve its role in providing financial advice for the purpose of acquisition or offering on stock exchanges for multiple entities in vital sectors, as well as studying the launch of funds for new investments in startups.
Rafik Dlala, director of Intercap Capital, revealed in an interview with Amwal Al-Ghad that the company manages 8 deals in the Egyptian market with a total value of £1.5 billion, split between 6 capital raising deals and two acquisition deals nearing closure in the food and the pharmaceutical sector.
He referred to the company’s plan to launch its second fund, “T-Six”, to invest in emerging markets with a target capital of £600 million, referring to the current negotiations with 4:5 foreign institutions and banks that have expressed a desire to contribute to the fund, provided that the first phase closes in early 2023 with an initial capital of 10%. Millions of dollars.
The dialogue addressed the most prominent challenges facing the FDI industry in the Egyptian market and the sectors expected to be the most attractive for more acquisition deals during the coming period, with an assessment of the current performance of the Egyptian stock market and expectations aimed at a strong recovery supported by the current strategy for market management and its supervisory bodies, and to the text of the dialogue:
The Egyptian market is facing numerous challenges under the pressure of the current economic crisis. What are the most prominent scenarios for the inflow of foreign investments in the coming period?
There is no doubt that the economic crisis witnessed by all the countries of the world has affected the rate of flow of foreign direct investment aimed at developing markets, with the exit of many investments due to the high rates of risk in these markets, especially in light of the lack of economic vision in the short and medium term, which has stimulated the search for more investment alternatives. Safer and higher returns, treasury bills and bonds have taken the first place on the investment list of most institutions and funds in the last period.
Despite these repercussions, the Egyptian stock market still has a positive outlook on the segment of investment institutions and funds, which has been translated into extraordinary deals related to acquisitions and mergers in recent months, in many sectors, especially the health and pharmaceutical sectors, non-banking financial services, real estate and food. , whether listed or unlisted companies, especially in light of the low prices of all listed shares and their record low price levels in their history, despite the high asset values of many companies and the activity of their investments in their areas.
Consumer sectors are among the sectors most expected to witness more acquisition deals over the coming period, underpinning their ability to adapt to various fluctuations and changes, be it political or economic, in light of the consumer nature of emerging companies. there are many funds that study the possibility of acquiring companies.In the food sectors with the aim of exploiting the opportunities in that sector, despite the challenges faced by companies in the sector due to the pressure of the current economic recession and the high rate of inflation, in addition to the high production costs due to the supply chain crisis and the high value of the dollar, the sector is still at the top of the attention of a large segment of investors.
The economies of all countries are currently suffering from the contractionary policies of central banks. What impact does this have on the investment situation in the Egyptian market?
Over the past 3 years, the world has witnessed a series of turmoil and challenges that have hit the economies of all countries of the world with predictions of a global economic recession and slowdown in light of the continued deterioration of inflation rates and the continued trend towards further raising interest rates as a way to absorb this inflation, but at the level developing countries from one point of view. In theory, an increase in interest rates was not considered an ideal decision to contain the consequences of this phase, especially since the current inflation was imported from abroad and was not caused by high demand rates. High cost of borrowing.
Many burdens are currently on the shoulders of the leadership of the Central Bank of Egypt, which is entrusted with achieving the highest level of stability at the monetary level, while providing more benefits to companies operating in the market to support their capabilities. overcome the challenges of this phase, while working to maintain the attractiveness of the market for foreign investments, direct or indirect.
The Egyptian Stock Exchange is the main destination of the economy. How do you describe the situation on the stock market and to what extent does it play a role in the funding allocated to it?
The stock market is one aspect of investment that is directly affected by the turmoil and tension imposed by the nature of the current phase, and the translation of the general market performance over the last three years is the pressure of a sharp fall in the index, and the recording of stocks at their lowest price levels, with a noticeable decrease in daily volumes and values trading in connection with the exit of foreign institutions and the reluctance of domestic investors to trade, and the economic situation is no longer the only reason for the poor results of the Stock Exchange, but it is related to many internal challenges related to the small number of strong securities available for trading, along with some tax restrictions imposed on investors.
All parties rely on the new leaders of the capital market and their supervisory bodies to restore the activity of the Egyptian Stock Exchange, as the new management follows a clear strategy to revive the capital market, by holding meetings and communicating effectively with its parties to discuss and formulate mechanisms aimed at restoring the confidence of foreign investors and strengthening the confidence of domestic investors in the Egyptian Stock Exchange As one of the channels of investment and financing, the business strategy of the Egyptian Stock Exchange in the coming period is based on three main axes, namely supply and demand and the improvement of trading mechanisms, along with work on the application of technological solutions and applications in the process of developing new financial products that suit different types and categories of investors. In connection with continuing to spread awareness and financial culture in order to change the misconception about the stock market.
Undoubtedly, the recent amendments to the listing and delisting rules of the Egyptian Stock Exchange approved by the Financial Supervisory Authority contribute to strengthening the role of the market as a platform that helps companies access the financing needed to expand and support the growth of the national economy, as the changes allowed temporary listing on the stock exchange and a period of 6 months from registration. Register, offer and start trading to enable the Egyptian Stock Exchange to support companies to prepare for the offer. The amendments also made it possible to delete the listing of shares of companies in liquidation at any stage of liquidation, while allowing the listing of all state financial instruments issued by the state in accordance with the requirements of the Ministry of Finance.
During the past months, the Stock Exchange has begun to reap the fruits of these steps, with the announcement of the concluded contract with the Monetary Fund, and the announcement of the Central Bank on a package of stimulus decisions aimed at greater flexibility of the exchange rate. , to witness the major indices record their highest levels since the beginning of the year, supported by relative activity in volumes. And trading values, supporting upcoming new offers, whether government or private, and restoring confidence in the market and pumping foreign institutions and greater liquidity of funds in light of the diversity of securities traded before investors and the representation of all sectors in the market.
In light of the expected growth in acquisitions and mergers, tell us what are the features of InterCap Capital’s strategy in the Egyptian market?
InterCap Capital started its activity on the Egyptian market in 2018. It is a subsidiary of the company “InterCap International” based in Canada. He took Egypt as a gateway to expand his activities in the markets of the Middle East. Its strategy is based on several activities related to providing financial advice to companies for the purpose of acquisition or listing on the stock exchange. We also pay attention to the segment of small and medium-sized companies, as well as to startups, providing financial consulting services from capital raising, valuation and restructuring of entities.
During the coming period, we look forward to obtaining new licenses to expand the company’s activities in the Egyptian market, as we are studying the possibility of submitting an application to the Financial Regulatory Authority for a license to promote and cover subscriptions during the first quarter of 2023, in addition to a license to sponsor a listing on the SME Exchange , within the framework of support for this segment Among the companies that have recorded positive growth rates in the recent period, supporting the state’s aspirations to overcome all obstacles that prevent their growth, since the state has recently worked to prepare the economic situation for these companies, while providing a package of incentives that improve investment operations in addition to working on the diversification of financing alternatives.
What about managed businesses in the Egyptian market and what is the target time frame for their implementation?
The company has recently completed the study and valuation of a Shariah-compliant Islamic sukuk issuance in two tranches, worth EGP 2.5 billion for the first and EGP 1.5 billion for the second, with the participation of several local banks.
We currently manage 8 deals in the Egyptian market with a total value of £1.5 billion, divided into 6 capital raising deals for several companies in different sectors represented in food, healthcare, transport, energy, in addition to the technology sector, with a total value of £800 million , by providing financing or attracting investors to contribute capital, with two acquisition deals, one in the food sector worth £500 million for the benefit of the Gulf due diligence phase investor, and the other in the transport sector worth £200 to 250 million pounds. The intention is to conclude these deals by the end of the year. The current year is 2022.
The company recently completed providing financial advice to the Commercial International Bank of Egypt, in the process of purchasing a 15% stake in El Sewedy Engineering Industries – one of the Zaki El Sewedy Group companies, through an initial capital increase agreement, with the aim of using it to finance future expansions companies in local and regional markets.
Is there an intention to launch new funds in the coming period?
We recently closed the Inno Ventures Fund, which specializes in investing in startups to the tune of EGP 25 million. It has already invested in about 20 startups whose work is related to financial technology, and the return on these investments has been achieved at a rate ranging between 20: 25%, with an average investment ranging between £500k and £2 million in each company.
During the current period, we are studying the launch of another fund called “T-Six” to invest in emerging companies during the first half of next year 2023, through the asset management and investment funds arm of Inno Ventures, with a target capital of 600 million pounds. The fund’s investment strategy plans is based on the technology sector by investing in companies in the fields of technology, artificial intelligence, medical technology, food technology and electronic games.
It is planned to raise capital in 3 phases, we aim to close the first phase at the beginning of next year after obtaining the necessary approvals, since the current period is witnessing serious negotiations with about 4:5 foreign institutions and European and Canadian banks that have expressed their desire to contribute to the capital of the fund , and is expected to raise about $10 million during the first phase.
It is intended to direct the investment of another fund to invest in about 40 emerging companies, with an average investment in the range of 10 to 15 million dollars, and during the investment period of 5 years, during which the company and its activity will be supported. maximized to completion by registration on the Egyptian Stock Exchange. During the current period, we are studying investment opportunities in about 6: 8 companies with the aim of starting to pump liquidity into them after the closing of the first phase.
The company is looking forward to deploying the majority of the fund’s capital in local startups, with around 20% allocated to the Saudi market, through its investment arm InterCap Capital there.