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Samena Capital founder sticks with merchant banking principles

Samena Capital founder sticks with merchant banking principles

Frank Kane

September 15, 2015 Updated: September 15, 2015 06:55 PM

One-page article

Shirish Saraf likes to take a long-term view. “There were 200 years of merchant banks, so the last 20 years of modern-style investment banking must be seen as an aberration. Now the times are changing again,” he says.

He made headlines in May when he announced plans to bring old-style merchant banking to the UAE via a link-up between his investment group, Samena Capital, and Kleinwort Benson, one of the hallowed names of the British banking scene.

That deal may not proceed exactly according to plan due to the intervention of the Chinese conglomerate Fosun in the complicated Kleinwort ownership structure – on which Mr Saraf has very definite views (see below). But he is still convinced that the traditional qualities of the merchant banks are enduringly attractive.

“Pedigree, access, putting your money where your mouth is, aligning your interests with those of the clients. Those are the qualities the merchant banks lived by, and all that changed when the bulge bracket banks got involved,” he insists.

Those same qualities are also the ones he has cultivated at Samena, and grown it into a US$745 million investment group, with an investor list that reads like a “who’s who” in regional business.

His lineage is worthy of any blue blood merchant banker. He boarded at top British public school Charterhouse, then after a stints at Cambridge and the London School of Economics, he worked at a range of banks in his native India and Oman (where he was brought up).

By the late 1990s he had met Arif Naqvi, a fellow LSE alumnus, and got involved in the first private equity buyout in the Middle East, the $116m deal to acquire Inchcape’s marketing businesses in the region. By 2002, he and Mr Naqvi founded Abraaj Capital, now by far the biggest private equity firm in the Middle East.

The deals came thick and fast: big-name corporates like Arabtec, Aramex, EFG Hermes all went through the books. “It [Abraaj] became a story in itself,” says Mr Saraf.

In 2007, the story changed abruptly. For a variety of personal reasons – family illness, turning 40 – he left Abraaj. Coming just before the financial crisis, the timing of his exit was fortuitous. “Sometimes you just decide to move on. As they say, in love, war and finance you need a sense of timing,” he reflects.

He went to live in London “in retirement” as he calls it, wrote a novella in verse which he hopes will be published soon, and got involved in a children’s charity, Little Dreams, with his friend the rock star Phil Collins. He established a scholarship at Charterhouse. “I wanted to do other things apart from finance, but then I soon got bored with the other things.” Samena was the result, launched in 2008.

The acronym stands for South Asia, Middle East and North Africa, but it is also a term for “collective” or “together” in ancient Buddhist script. Mr Saraf certainly has collected together a pre-eminent group of shareholders. Gulf ruling families and Asian tycoons are well represented among his 34-strong list of principal shareholders.

“We are an asset management company with entrepreneurial investors. We like to take positions and we evolve them. We invest in stage and mature businesses, not venture capital or turnaround situations, but we are sectoragnostic. And we will get involved in public and private situations,” says Mr Saraf.

That diversity is reflected in the current portfolio. Alliance Global Logistics, 80 per cent owned by Samena, is a Singapore-based group that has spread beyond South East Asia to build a network in the wider Asia Pacific as well as America and Europe. Samena also has a 5.5 per cent investment in Flamingo International – a duty free business headquartered in Dubai but with offices in 32 countries.

Dynamatic Technologies, in which Samena has 13.3 per cent, is an Indian engineering company much praised recently by the prime minister Narendra Modi for its work with the US aerospace giant Boeing. Mahindra Two Wheeler is the motorcycle business of the multibillion Mahindra conglomerate, with Samena as a 10.3 per cent investor.

There are also big investments in special situations and direct investment funds.

But undoubtedly Samena’s best-known recent investment is the 31 per cent stake it has in RAK Ceramics, the global leader in ceramic tiles, sanitary and tableware based in Ras Al Khaimah. Samena bought the shares – quoted on the Abu Dhabi Securities Exchange – from members of the RAK ruling family, and has since brought in new investors from regional sovereign wealth funds attracted by the global appeal of the RAK Ceramics brand. “It was a transformational deal, and the shares have performed very well in a falling market,” says Mr Saraf.

He is excited about the prospects for RAK Ceramics in Iran, where it has a big modern facility in Isfahan. “We have bought out the local shareholder and now owns it 100 per cent. Next year it will be running at 100 per cent capacity. Iran is the fifth- largest ceramics market in the world and it is a massive opportunity,” he adds.

But it is clear that merchant banking, and the Kleinwort deal that is dangling in the air, is very much on his mind at the moment. The deal for Kleinwort was intended as a new leg to the Samena business to complement private equity investment and credit provision, but that strategy is looking uncertain after Fosun, a Chinese conglomerate, made a hostile approach for Kleinwort’s Belgian-listed parent BFH.

“If Fosun comes in, it’s likely we would not proceed with the Kleinwort deal. There are change-of-control clauses in our deal and we would not want to be part of a hostile takeover. They do not work in banking, where you have to get the right chemistry with your business partners” says Mr Saraf. Spoken like a true, blue blood merchant banker.

fkane@thenational.ae