Three years ago, International Holding Company was a little-known company with aquaculture, food and real estate businesses. There were only 40 employees. Currently listed in Abu Dhabi, the group has a market cap of $240 billion, more than double that of global giants Siemens and GE, and employs 150,000 people.
This is an extraordinary change that has largely gone unnoticed outside the United Arab Emirates, and is barely understood even by bankers based in the region.
When asked to explain IHC’s dramatic growth, one Gulf-based international banker said, “Nobody knows.” The benchmark index of the ADX Abu Dhabi Stock Exchange, he is a popular answer to questions about conglomerates, even though he accounts for one-third of the FADX 15. The company’s share price has soared 42,000% since 2019, making it the second largest listed company in the Middle East after state oil company Saudi Aramco.
Even Syed Basar Shueb, who became IHC’s chief executive in mid-2019, admits, “It’s great.”
In an interview with the Financial Times, he claimed there was a simple explanation for the company’s growth: According to IHC, the more than 40 companies together are worth $4.7 billion — another Abu Dhabi conglomerate. From a Royal Group. Most of the businesses were transferred at a face value of 1 dirham each, Mr. Shweb said.
But that’s only part of the story. IHC’s total assets ballooned from $215 million at the end of 2018 to $54 billion in the third quarter of 2022.
IHC said this was due to growth in the business it currently manages. “There is no dividend. Profits earned in 2020, 2021 were mainly . . reinvested,” Shueb said. “We are going to make giants here… giants of the world.”
But in Abu Dhabi, the UAE’s capital and wealthiest member of the Commonwealth, some see the IHC as an example of the increasingly blurred relationship between business and power. It also raised questions about transparency.
“It’s probably the biggest threat to ADX because we don’t know what’s going on,” the banker said. “There are a lot of great things happening at ADX, and some that no one knows.”
IHC’s impressive growth in market capitalization has raised concerns, according to a person familiar with the matter, so officials in neighboring Dubai are no longer considering the possibility of resuming discussions on a merger between IHC’s stock market and ADX in the future. It is said that they do not.
Ernst & Young say their review of IHC’s latest financial statements in the third quarter of last year was “significantly less extensive” than an audit in line with international standards, so E&Y will get assurance of “all material matters” I said I couldn’t.
IHC said: . . External auditors generally do not perform full-scale audits of these financial statements. ”
The company’s transformation can be timed to coincide with the appointment of Sheikh Tahnoon bin Zayed Al Nahyan, one of Abu Dhabi’s most powerful figures, as chairman in 2020. He is not only the UAE’s National Security Advisor, but its president, Sheikh Mohammed bin Zayed Al Nahyan, who oversees a growing business empire.
In addition to his role at IHC, he has worked with ADQ, an increasingly active new state-owned investment firm, First Abu Dhabi Bank, the UAE’s largest lender, and Abu Dhabi-based artificial intelligence and cloud computing firm. I am chairman of Group42.
He also manages the Royal Group, the holding company that owns 62% of IHC. About 24% of IHC’s shares are freely traded and over 90% of his investors are from the Gulf countries.
Shueb said Sheikh Tahnoon’s vision for IHC was “limited to creating value for shareholders.”
“How we create [value] It’s being cascaded down to management,” he said.
He dismissed skepticism about what caused the stock’s rapid rise, saying it was “a bit of ignorance on the part of bankers not looking properly.”
“Investors who are willing to invest in this market capitalization can be sure that those assets have great value, so it is only because they have done their homework well,” he said. “People still think that certain assets outside [with Royal Group] Come to IHC Group. . ”
Shweb tried to describe the group’s goals as follows: [to] We create value for our shareholders by investing in a variety of portfolios rather than one investment stream. ”
“We make acquisitions, we create synergies, and then we diversify,” he said.
As an example, if IHC acquires a telecom company, it said it would integrate into IHC’s services side and expand into “solutions” and “hardware sales.” In agriculture, there was a plan to supply food “from farm to table.”
He added that the company has a war chest of $10 billion for investments and is targeting group revenue growth from $7.7 billion in 2021 to $27 billion in 2023, primarily through acquisitions.
“Our five-year plan is to reach 1 trillion dirhams [$272bn] At least in terms of earnings, acquisitions, and our own business, we’re doing very well,” Shub said.
The 2022 IHC deal includes a $2 billion investment in three Mumbai-listed companies that are part of the empire of Asia’s richest man, Gautam Adani, and a 50% stake in a Turkish clean energy company. Includes a $500 million offer to purchase % shares, and a $2 billion offer. Buy up to 31.25% of Colombian food group Grupo Nutresa.
Shueb believes IHC made $6.5 billion in profit in the first nine months of 2022. This is a 236% increase for him compared to the same period in 2021, largely due to investments including his stake in Adani companies.
Shueb said IHC’s focus is on technology, healthcare, real estate, construction, food, agribusiness, and general investments. Geographically, we are focusing on Asia and Latin America, and are looking for deals in markets as diverse as Turkey and Indonesia.
“These are advancing economies. , I can reach 100 million people through these companies,” he said.
He added that IHC is “considering certain deals” in the US as well, and already has several stakes, including Elon Musk’s stake in SpaceX. However, he sees Europe as “a very uncertain market at the moment”.
“Lots of very good deals [in Europe]But [we] I don’t know if these good deals will work out,” he added.
“It’s up to them if they want to do it,” Shub said when asked why there hadn’t been an independent study of the group despite the group’s size and ADX’s dominance.
“When I go to the market for my company’s IPO, I get ample questions from the local investor base…they do a fair amount of research into our finances,” he said . “Our book is very open.”
IHC discussed the ratings with credit bureaus, but the process ran into a snag when the bureaus asked what the group was compared to, Shueb said.
“The team is still moving [on the rating and] Maybe we will find a solution,” he added.
He said that excluding trade debts of investee companies, IHC has about AED 10 billion in debt and will consider increasing borrowings as it expands. The group has begun developing relationships with international banks, including securing “billions of dollars” of loans from Standard Chartered, and has been involved with Goldman Sachs and UBS, he added.
Others have to convince the group’s strategy.
“It doesn’t make sense to me because it’s a $200 billion market cap company with less disclosure than much smaller companies and a whole complex of very active listed and unlisted subsidies.
But “I’m sure some banks are looking at what they can do because it’s such an important source of transaction flow,” he added.