Turning slump into opportunity

Dubai: In a short span of three years Millennium Finance Corporation has made its mark as a new generation global investment bank with specific regional focus.

The bank has done more than $9 billion (Dh33 billion) worth transactions so far and has launched two private equity funds. It was the lead manager and joint bookrunner for DP World's $5-billion IPO and the sole financial adviser to ArcelorMittal on a $2.2-billion acquisition of mining rights in West Africa.

Keba Keinde, the Chief Executive Officer of Millennium drives the management team of this young institution. Keinde, an engineering graduate from Ecole Nationale Supérieure des Télécommunications, France and an MBA from the Massachusetts Institute of Technology has extensive experience in global banking and finance with specific focus on Middle and Africa region.

Prior to joining Millennium he was Head of the Middle East, Africa, Turkey & Iran at BNP Paribas for four and a half years. In an interview he spoke to Gulf News about his vision of developing the first ever global scale Islamic Investment bank from the Middle East.

Millennium was launched with the objective of creating a Middle East-based global investment bank with special focus on the Middle East, South Asia and Africa.

Gulf News: With three years in operation, how is your objective shaping up?

Keba Keinde: Well, I think we are on track to reach our goals. We had a good understanding of the region before we started. After three years in operation we know that the potential of this region is much larger than what we originally anticipated. The rationale for setting up this institution was very simple. If we look at what we call the emerging economies that includes Africa, Middle East, Asia, the Central Asian Republics, they represent about 50 per cent of the world economy. A few years ago it was estimated that these economies will grow to represent about 60 per cent of the global economy in 20 years time, but with the current global financial crisis, the emerging economies are expected to reach that target within next 10 years.

If you look at the history of recent global transactions you could see a fairly large number of companies from the region competing with their Western counter-parts in all kinds of financial transactions. So strategically it is important to create an institution of global scale from the region and that is where Millennium fits in.

What is your primary focus and what you have on offer for the region?

Our primary focus markets are Middle East, Africa and Asia. We offer corporate finance, asset management and private equity services to a broad array of international and regional clients, international companies, governments, financial institutions and high-net-worth investors. Our objective is to first get a firm foothold in our own region which is Middle East then spread out into Asia, Africa and eventually to become a global player.

Millennium is an Islamic institution. Apart from the fact that it is majority owned by Dubai Islamic Bank, was there any specific reason to opt for an Islamic institution?

We took the Islamic route by choice. We believe that it is a fast growing segment in the world of finance and there is a huge supply gap in the global market. If you look at the number of investment banking institutions in the Dubai International Financial Centre, we are one of the very few Islamic institutions operating from here. Secondly, in our major areas operations such as corporate finances, private equity, M&A and asset management, there are very few constraints for us to effectively compete with conventional institutions. One major differentiating factor between us and other institutions in the regions is that we don't have to use our balance sheet to run our business. Unlike most banking institutions, our business model is not based on financing through leverage. It is not a debt-based model.

Your initial target has been to emerge as a leading regional investment bank within the region. After three years of existence in the region, where have you reached on your global ambitions?

For the first three years our objective was to achieve, product expertise, regional expertise and sector specific expertise. We are focusing on areas such as Telecoms & Media; Energy, Transport & Infrastructure; Financial Institutions; General Industrial, and Real Estate. By now we have good understanding of our region and are ready to expand further. In the first phase of expansion we are going in to larger markets within the region such as Egypt Saudi Arabia, India and Nigeria. In the second phase the focus will be other emerging markets outside this region namely Russia and Brazil.

Has the global financial crisis in any way slowed down your plans?

The crisis came as an opportunity for us. We managed to have a very good year. For 2008 our revenues increased by more than 50 per cent and our net income in terms of margins have increased more than 10 fold and more than everything we have no debt. Most of the regional institutions had some difficulties this year.

But isn't tight liquidity a major constraint in your business?

I do agree with that point. But there are new segments of business like strategic advisory in areas like mergers and acquisitions, privatisation and so forth that are not affected by the current liquidity situation. The speciality about our region is that despite the crisis there are regional institutions which still have a lot of cash and are looking for expansion. Take the case of many telecom companies in the region. Many of them have reached 100 per cent penetration in their home markets. They are cash rich and are looking for expansion opportunities.

We need to distinguish between financial transactions and strategic ones. Liquidity factor will have an impact on financial transactions where huge leverage is involved.

You have plans to launch five sector specific funds. Have you been able to close any of them?

Millennium Private Equity, a wholly owned subsidiary of Millennium Finance, is developing a family of sector-focused private equity funds with a total value of $5 billion - the largest private equity initiative in the Middle East and Africa.

We have announced two funds, in Technology and Energy, each valued at $1 billion and have completed the first close both these with $250 million each. We have made some private equity deals of highest standard. We have deployed $100 million in Bharti Infratel in India, we made that investment along with Goldman Sachs Capital partners and Temasek and we were the only private equity institution from this region to participate in this transaction.

How has the market plunge affected the valuations of some of your private equity acquisitions?

In most cases the valuations have appreciated because most of these deals were private transactions and we still remain invested.

Many private equity companies have made two big mistakes. First, they made their acquisitions in the bull market and second they put their capital into public equity markets where they lost heavily as the markets plunged.

Despite the meltdown are you still going ahead with the other sector specific funds you have originally planned?

Yes we are still going ahead with funds such as the Cleantech Fund, Natural Resources Fund, Real Estate Fund and an Africa Fund. Currently we are in a pre-marketing phase and we are very confident about these funds. Some of the large regional institutions such as Dubai Islamic Bank, Dubai World, Kuwait Finance House and the Islamic Development Bank are our sponsors and we are confident of their commitment to our new funds.

Which are your most important regional markets?

Undoubtedly in the Middle East it is Saudi Arabia which represents about 40 per cent of the GDP of the region with huge liquidity and has enormous infrastructure projects that are being developed. As far as investment banking is concerned, the competition is limited and there is enormous scope for an institution like ours.

Another major focus market will be India. Despite the crisis India continues to grow because the size of its internal market. We have no intention of competing in the local market with Indian institutions. Our focus is going to be on top 20 groups because they are starting to expand outside. Some of the large groups such as Tatas, Bharti Telecom and ArcelorMittal are looking to expand into Africa and the Middle East.

Africa too is very important market for us. We have some very attractive opportunities in Africa as some of the large global corporations are poised to enter the continent. In Africa we are planning to start with Nigeria. Like in all other markets, here too we are going with a strong local partner.

Are there still M&A opportunities in the region?

As I said earlier there are strategic opportunities. For example recently we sold a telecom licence in Iran for a market value of $5 billion. Some of the world's leading telecom companies were competing for this deal even in the middle of one of the worst financial crises in the recent history.

What distinguishes Millennium from its peers in the current economic conditions?

We approach our business through a strategic sector focus. We are the only regional firm to offer a sector focus and provide international coverage across the Middle East, Africa, Europe and Asia.