Under the patronage of His Highness Sheikh Dr. Sultan bin Muhammad Al Qasimi, Member of the Supreme Council Ruler of Sharjah, the concluding day of the Sharjah FDI Forum 2019 headlined an expert panel of renowned banking experts and technology specialists to explore the hurdles to corporate sustainable growth and the implications of the developments in technology on future economies and societies – and the impact it will have on investment and innovation as we know it.
A panel discussion, titled ‘Raising Funds to Accelerate Corporate Sustainable Growth’, which was moderated by Andres Tarbuck, Head of Capital Markets, Al Tamimi and Company, four regional industry leaders - Fahima Abdul Razzaq Al Bastaki, Executive Vice President, Head of Business Development at Dubai Financial Market (DFM); Saeed Mansoor Al Awar, Managing Director, Middle East Region, Rothschild & Co.; and Asar Mashkoor, Managing Director Investment Banking at Emirates NBD Capital - discussed what appeals to an investor or large-scale investment fund looking to invest, whether in a well-established or growing company, and also offered practical tips on what companies can do to increase their investment appeal.
Saeed Mansoor Al Awar opened the floor on the options to raise equity with the observation that, “Whether they are family businesses or corporates in the UAE, an IPO is an option. We have the DFM that supports the listing of companies and it is a good market in the UAE. But the real questions here are, what is the ideal route for that company to raise funds, is it in the right business cycle and is the business ready to be listed. IPO is definitely a good route to provide a sustainable avenue to raise funds in the future, and an important aspect of an IPO is corporate governance and sustainability. Once the company is listed and if you need more money, you can always float a rights issue. It can keep on growing and use that avenue of funding to fund your future growth.”
Venture capital and private equity are viable funding options, said Asar Mashkoor, taking the example of GEMS Education which took private equity in 2007.
He said: “There are a lot of criteria to be fulfilled for an IPO, which is why many companies go for private financing from the equity side. Depending on the size of the business, you can go to one of the large private equity groups. Take for instance the GEMS Education issue, which we worked on, where CVC Private Equity took a large minority stake in the company with a very large dollar investment. Similarly, Emirates NBD seeded and founded a company, Network International, which processes card payments, 20 years ago. So, our 51 percent stake became more valuable by the time we sold it. We also floated an IPO for it and took the business public, listing on the London Stock Exchange, and it has been one of the best-performing IPOs this year to date.”
While these methods of financing are viable for larger companies, for the smaller ones and SMEs, especially in the technology sector, there is whole new breed of venture capital willing to invest in such businesses, said Mashkoor. “Examples are acquisitions like Careem by Uber and Souq.com by Amazon. Around a dozen venture capital groups have set shop here and are acquiring companies in the technology sector, each of them investing between $500,000 and $2 million in companies based on ideas that work, but need funding to take it to the next level.”
Al Awar added: “The key point here, and it is important for our government to note, is to focus on the key areas investors are seeking to invest in. If you provide that opportunity for them to come, where they can see value, they will come. Money always follows value.”
Fahima Abdul Razzaq Al Bastaki said when DFM started the IPO programme in 2009, they had targeted 40 companies, majority of which were family businesses, for listing. Many of them could not float IPOs because they were just not ready for it. “Corporate governance was an issue. Which is why DFM is building on the sustainable development plan, as envisioned by the wise UAE leadership. We have been working with a lot of family businesses. Some of the regulations have been changed to cater to family businesses through the 2016 amendments to the company law regarding equity state and stock options. We expect the listings to increase in future.”
Future of technology
Another panel titled ‘The Future of Technology (Digital Revolution, Artificial Intelligence, Robotics, Drones, Latest Innovation)’ was moderated by Billy Fitzherbert, Middle East Regional Editor, Oxford Business Group, sought answers to questions on how emerging technologies will be the gamechanger in determining who wins or loses in the new global digital order; and how these disruptions can boost Sharjah and UAE’s FDI and competitiveness.
Mohamed Abdel Razek, Regional CIO of Standard Chartered Bank Africa and Middle East; Osama Al Zoubi, Chief Technology Officer at Cisco Middle East; Ghada Abdelkader, VP, CE-Invests, Crescent Enterprises; Amer Mdanat, Huawei Global Director, Smart Cities; and Sibu Siddique, Vice President - Customer Success for MEA & Turkey, GE Digital, were the panel’s speakers.
Mohamed Abdel Razek said that digital technologies had disrupted traditional businesses, including banking. “Robotics, in particular, had replaced human intervention at many levels. Digital banking has taken over large areas of banking operations. This is where Fintech companies are coming into play. More and more economies are going digital, which makes all sorts of transactions open and visible, so there will be more transparency. This transformation is very rapid, and nations have to take this into consideration to implement these changes properly.”
Technology has impacted every sector, said Osama Al Zoubi. “This is expected to accelerate exponentially in future. Since 2000, more than 50 percent of companies globally have been disrupted and they have either vanished or transformed into a completely different business model. This is only going to increase. We think there will be no industry that will escape disruption. When you talk about strategies being developed by companies and investment, technology is at the core of everything. Today, the issue is how to turn the challenge of technology companies are facing, into an opportunity.”
Sibu Siddique added: “Digital technology will cut across all verticals with three components: input (IT, social media and big data), processing (clouds, machine learning and AI) and output (screen printing, mobile services). Robotics and cyber security apply across all these components. The way it will impact the regional economy is that by 2021 there will be 160 million users in the market that is up for grabs and the amount of data that is going to be generated is going to be 2+ zeta bytes, which will be more than the grains of sand in the Saudi Arabian desert. So, we will be sitting on this huge commodity of data that businesses will be vying for.”
He added: “How this will translate to economic opportunity can be gauged by the fact that the UN has calculated that increase in digital transformation contributes up to 3.9 percent increase in GDP per capita. For instance, Colombia recently increased their broadband bandwidth by a couple of megabytes, which increased their GDP.”
Ghada Abdelkader said: “From an investor’s point of view, we look at the adoption of technologies. Looking back, I would say it took probably 14 years for people to adopt computers; seven years to adopt internet, three years for Facebook and a surprising 14 days for Pokemon Bone. What this means is that people are willing to adapt and adopt technologies in a way that benefits them. This is being reflected in the investments that are being made into tech firms. Five years ago, we had 20 percent of the pipeline going to emerging technologies. Today, it has completely changed to 80 percent going to tech or tech-oriented businesses that are looking to establish or scale up.”
According to Amer Mdanat: “All the technologies that are being deployed to change the way we live is based on monetising data that is enhanced by AI, robotics and machine learning. I see companies innovating on new capabilities in future. We should look at the horizontal integration of these technologies, drone technology, in particular.”
The Sharjah FDI Forum 2019 concludes today (Tuesday).