Billionaire businessman Karim Jamal has become the second largest shareholder of Uchumi Supermarkets ahead of Kenya Wine Agencies after he bought additional shares following last year’s relisting of the retail chain.
The retailer’s 2012 annual report shows that Mr Jamal’s stake stood at 7.56 per cent in June from 5.9 per cent in 2005.
Uchumi says that Mr Jamal increased his holding in the retail chain when he bought additional stock after the retailer returned to the Nairobi Securities Exchange last year and converted into equity a loan he had lent the retail chain after its near-collapse.
He is estimated to own shares worth more than Sh1.5 billion with significant holdings in Nairobi bourse listed firms like Kenya Power, Mumias Sugar, Sameer, Sasini and Kakuzi where he has been in and out of their top 10 shareholder lists over the past three years.
“Mr Jamal has been buying shares in Uchumi since we went back to the market, but overtook Kwal when he participated in our debenture,” Jonathan Ciano, the CEO of Uchumi Supermarket told the Business Daily in a telephone interview Wednesday.
A debenture is debt instrument that is not secured by physical assets or collateral, and Uchumi issued these lending products to its existing shareholders and suppliers when the chain was searching for more capital to shake off receivership.
Mr Ciano said Kwal never participated in the lending, paving the way for Mr Jamal to cement his holding in the supermarket chain after converting the debentures into shares in a transaction that saw the Government become the single largest investor with a 13.4 per cent stake.
Of the Sh860 million equity debt swap, the Government’s share was Sh350 million, which earned it 35 million shares, suppliers Sh200 million (20 million shares) and shareholders’ Sh310.
The government loan was part of Sh875 million advanced to the retail chain in May 2006 after its nearly collapsed under the weight of debts, which saw it suspended from trading at the Nairobi bourse till mid last year.
Analysts at Kestrel Capital reckon that Mr Jamal can now push for a board seat or have a direct representative because he is top of the perking order of the retail chain’s top shareholder ranking.
Both Kwal and ICDC are represented in Uchumi’s board despite their lower shareholding of 4.28 per cent and 2.75 per cent respectively.
Mr Jamal’s faith in the retail chain has paid off given that Uchumi paid a dividend this year after a 10-year drought and has had the best performing share at the NSE over the past year.
The retail chain declared a dividend of Sh0.30 per share—the first payout since 2002 and pointer that the management is confident of reversing the drop in earning, which is the first since it began making a profit in 2008.
The payout was boon to shareholders who have seen their share rise 185.82 per cent to touch a high of Sh20 over the past year, making it the top performer at the NSE in the period.
Mr Jamal’s stake is currently worth Sh384.2 million and he had earned a dividend of Sh6.02 million.
Although the firm’s sales jumped 29.7 per cent to almost Sh14 billion in the year to June, its net profit fell by a third to Sh273 million on higher costs due to the opening of new stores.
The company opened three new stores in Uganda, one in Tanzania and two in Kenya during the year to June.
Uchumi Supermarkets aims to raise Sh1.5 billion through a rights issue set to happen in the second half of next year, pricing the offer at Sh15 a piece.
Shareholders of the listed firm Tuesday approved the plan to offer 100 million new shares to raise cash to fund local and regional expansion.
The additional funds will help Uchumi take on its competitors — Nakumatt and Tuskys—whch currently dominate the East African retail scene with 38 and 42 branches respectively and second-tier players Naivas and Ukwala.
This is the second time the retailer is doing a rights issue having raised Sh1.2 billion in a cash call in 2006 intended to finance reorganisation and retire debilitation debt. However, the firm collapsed in June 2006 shortly after raising funds from the public.