Dubai investment bank eyes NSE seat after Jo’burg entry

Arqaam Capital, a Dubai-based investment bank that focuses on emerging and frontier markets, is eyeing a seat on the Nairobi Securities Exchange (NSE) to drive its Africa expansion plans.

The firm, which already tracks the performance of six NSE-listed companies, says it plans to open a regional office in Nairobi and possibly acquire a seat on the exchange.

Arqaam Capital was recently awarded a licence to trade on the Johannesburg Stock Exchange.

“Our local office in Johannesburg is the first step, we are building this business from the ground up. We will be exploring the option of opening other offices and getting seats on other sub-Saharan markets as the business grows,” Arqaam Capital executive director and head of the South African business Ross Abbott said in an interview.

The NSE confirmed that Arqaam executives visited the bourse last year when they discussed possible partnerships.

“They are interested in the exchange and visited last July,” said the NSE head of market and product development Donald Ouma.

The investment bank’s corporate finance arm has already entered into a contract to sell an undisclosed “Kenya-based mobile value added services firm,” documents seen by the Business Daily indicate.

While the documents do not disclose the amount involved, Arqaam’s corporate finance department says it takes deals that on average involve companies valued at between $20 million (Sh1.7 billion) and $300 million (Sh25.7 billion).

The investment bank is also covering Co-operative, Equity, Diamond Trust, Standard Chartered, Barclays and KCB banks; and has plans to expand the coverage by seven more companies in this financial year, both in the consumer and insurance sectors.

A seat on the NSE is equivalent to a shareholding.

Arqaam will however still need the Capital Markets Authority (CMA’s) approval to do brokerage or investment banking business.

The CMA requires that an investment bank has at least Sh250 million paid up capital while a stockbroker is required to have a minimum of Sh50 million.

The last investment banking licence issued was to Chase Bank’s subsidiary Genghis Capital that was given early this month, making it the 11th investment bank.
Eco Bank had applied for an investment banking licence mid last year.

Investment banks are eyeing fundraising deals, stock sales and rights issues, syndication deals, and other debt issues which are expected to increase in tandem with expansion plans and restructuring of companies’ balance sheets.

EABL last week announced plans to raise Sh5.4 billion through commercial papers, the largest ever issued in the country.

The transaction is being handled by CfC Stanbic while KenolKobil’s Sh1.7 billion, which was the second largest ever, was handled by Kestrel Capital.

The CMA has been pushing to make Nairobi the region’s top choice for raising cash, listing and recently launched a 10-year plan to achieve this.

“The capital market is expected to play a pivotal role in the realisation of the development ambition of Kenya as captured in the Vision 2030, including the setting up of the Nairobi International Financial Centre, which is key to take the country to next level of double-digit economic growth,” said CMA acting chief executive Paul Muthaura at the launch late last year.

Part of the plan is for the NSE to achieve the MSCI Emerging Market by 2016, upgrading from frontier market status and for Nairobi to enter the Global Financial Centre Index (GFCI) ranking.