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Capital Markets

The rise and rise of Kenya’s silent billionaires at NSE

The Nairobi Securities Exchange. KCB Foundation director Sunil Shah (left). Reclusive investors build a fortune through consistent buying of shares in open market and maintaining a long term view of their equities portfolio. Photos/FILE
The Nairobi Securities Exchange. KCB Foundation director Sunil Shah (left). Reclusive investors build a fortune through consistent buying of shares in open market and maintaining a long term view of their equities portfolio. Photos/FILE 

A steady rise in investor wealth at the Nairobi Securities Exchange has put a handful of little-known businessmen in the exclusive club of paper billionaires, helping the bourse to retain its record as the shortest route to fortune in Kenya.

Stock market data shows that the billionaire investors with vast business interests outside the Nairobi bourse started cherry-picking stocks at the turn of the Millennium with a long-term view that has seen them rank among the wealthiest Kenyans.

The list of billionaires includes Amin Nanji Juma, Baloobhai Patel, John Kibunga Kimani, Sunil Shah, Kanaksinh Karsandas and Sandip Babla. Each has an NSE stock portfolio of between Sh2 billion and Sh5 billion.

Unlike the high-profile billionaires such as James Mwangi, Naushad Merali and the flamboyant Chris Kirubi who unlocked the value of their wealth by shepherding their companies to the stock market, the reclusive investors have built up their fortune through consistent accumulation of free floating shares at the Nairobi bourse.

The publicity-shy billionaires have benefited from the unprecedented appreciation of stock market wealth in the third year of former President Mwai Kibaki’s government.

Analysts expect the value of their wealth to continue rising as the economy recovers from the slowdown caused by elections early this year.

“The bright economic outlook means profitability of companies will rise underpinning share price gains and dividend growth,” said Robert Bunyi of Mavuno Capital.

NSE investors have in the past eight years seen their wealth multiply as companies split shares and issue bonus shares besides riding the long-term rallying in stock prices that has seen market capitalisation more than quadruple to Sh1.6 trillion.

Official market data shows that the high net-worth investors have a preference for blue chip stocks that have traditionally rewarded investors with steady dividend payouts and capital gains — and rarely liquidate their stakes.

“Big investors typically have the wherewithal and the firepower to ride the ups and the downs of the market hence their steady rise up the ownership ladder,” said Aly-Khan Satchu, a stock market analyst.

Owning large stakes in blue chip companies has seen the paper billionaires rake in millions of shillings in dividends every year.

Amin Juma, arguably the wealthiest among Kenya’s stock market investors, for instance earned Sh130 million from his stakes in Nation Media Group (NMG) and Diamond Trust Bank for the year ended December 2012. The businessman has 15.6 million shares in NMG and two million shares in DTB worth Sh5 billion.

People familiar with Mr Juma’s investment activities say he has since settled on publicly quoted equities as his key asset class. His 8.1 per cent stake in NMG is the second largest after the Aga Khan Fund for Economic Development’s (Akfed) at 44.6 per cent.

John Kibunga Kimani, another stock market mogul, holds more than a million shares in most of the NSE’s blue chips with a total equities portfolio of more than Sh2 billion.

Mr Kimani is one of the largest individual shareholders in NMG, Safaricom, Kenya Re, Kakuzi and East African Breweries.

His 2.7 million shares in EABL is worth Sh894 million and represents his biggest stock market investment followed by the 2.1 million NMG shares worth Sh636.6 million. Mr Kimani is known to have vast business interests outside the stock market, including transport, construction, and logistics.

The businessman, who was brought up in listed agricultural firm Kakuzi’s central Kenya estates, where his father worked, has 4.2 million shares worth Sh336.5 million of the company.

A retired civil servant, Mr Kimani is actively engaged in consulting in the agricultural sector as his stocks earn him millions of shillings in dividends.

Baloobhai Patel, a director of Pan Africa Insurance, is invariably listed as one of the largest individual shareholders of more than 10 companies on the Nairobi bourse. The 75-year-old has major interests in Pan Africa Insurance, Barclays, Bamburi, DTB, Mumias Sugar, and Safaricom currently valued at Sh2.4 billion.

Mr Patel also operates a tour firm Trans-world Safaris where he is the managing director.

Stock market observers say the businessman hardly dilutes his stake in the companies he has invested, confirming his strategy of maintaining a long-term view to stock market investment. His stocks are spread across multiple economic sectors including agriculture, insurance, telecommunications, banking, manufacturing, and construction — amounting to a general bet on the Kenyan economy.

Outside his money minting activities, Mr Patel is a dedicated philanthropist who contributes millions of shillings to Lions Club and Mombasa-based Pandya Memorial Hospital.

While some of the emerging capitalists have built wealth by spreading their capital in multiple stocks, some investors have made huge bets on single stocks that have paid off handsomely despite the downside risks.

Sunil Shah, a former director of KCB, is one such investor with 53.4 million shares in the bank currently valued at Sh2 billion and from which he earned Sh107.3 million in dividends for the year ended December 2012.

Regulatory fillings indicate that Mr Shah, who also serves as a director of United Millers Ltd, may be cutting his ownership of KCB.

Analysts see KCB as having a positive growth outlook through its regional expansion and ongoing enhancement of efficiencies in its large operation.

Another notable investor at the NSE is Karim Jamal whose shareholding in KenGen, Eveready, Mumias, Sameer, and Uchumi is worth about Sh550 million.

The investor has steadily increased his stake in KenGen since its listing in 2006 and is now the third largest investor in the power firm after the Treasury and the National Social Security Fund.

Mr Jamal, a self-made multi-millionaire, has interests in Kenya’s insurance agency business and plays golf regularly.

The rise of the silent billionaires at the NSE has caught the attention of executives leading the companies where they hold huge stakes.

Some executives of the publicly traded companies have watched with interest as the names of the low-profile billionaires rise in the list of top shareholders without any engagement with the management at the AGMs or other fora.

In capital markets circles, increased share accumulation in a company is often seen as a vote of confidence or preparation for a future takeover bid.

Some companies like Pan Africa Insurance have invited individual shareholders with significant stakes to their boards offering them the ultimate recognition.

The insurance firm appointed Mr Patel as a non-executive director in 2001 as the businessman’s stake topped 2.5 million shares equivalent to a 5.2 per cent stake. He has since increased his holding in Pan Africa to 19.1 million or 19.9 per cent of the firm making him one of the top single largest owners.

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