TransCentury Plc, the infrastructure-focused investment firm started in 1997 as an investment club before going public in July 2011, is seeking to raise Sh2.06 billion through a rights issue from next week.
Previously seen as politically connected due to its close link between some of its founders and former President Mwai Kibaki, TransCentury has battled a heavy debt load, losses and a sharp slide in share prices.
The firm says the storm is over and is embarking on a growth trajectory. CEO Ng’ang’a Njiinu spoke to the Business Daily.
We last spoke at the height of Covid, the talk then was about delisting. How did that change?
At that point, the main driver for choosing to delist was because the only source of capital that we were getting was indicating that they will prefer a business that is not listed.
Subsequently, there have been many conversations and shareholders have shown interest in recapitalising their business and that is why the decision was made to do a rights issue.
We are presenting this opportunity for the shareholders to participate in the future of the business.
Is delisting completely off the table?
The driver for delisting was to get capital. Right now we are doing a rights issue through a listed entity.
The current open market share price has fallen below the rights price. Do you think the discount for the rights issue is good enough?
When we were pricing, we gave a discount on average for the last three months at that point.
Of course, the market has shifted a little bit and ... you can’t change the price. But we thought that was the right pricing.
I think there could be some other issues around liquidity for some segments of investors that could be driving some selling.
But we believe the value that we bring as we float the rights is a good price.
Are you worried the prevailing share price will affect the uptake of the rights?
I think the demand for our share [will increase] as we put out information because people will see the value that they are getting into. This is the business of the future.
It is a business that is in a niche market. We will go ahead as we send information out there to ensure everybody gets it right. I believe there will be a demand for the rights issue.
TransCentury was until six or so years ago largely seen as a success story of investment pooling. What do you think lifted TransCentury from an investment club to the company that is listed on the Nairobi Securities Exchange?
TC is a great business. I read about TC when I was in another country working somewhere else. That was one of the success stories that led me to come back to Kenya.
It’s a platform which helped pool funds to allow locals to get into big businesses, scale them up and subsequently get additional funding to grow them.
The opportunities were there, it was really put together very well. It is still unfortunate the set of events that happened that led us into some turbulence.
But our teams have worked extremely hard to make sure that the business stabilises again. We are very excited that we are entering a period of growth again.
TransCentury used to invest in very profitable firms before it focused on mega infrastructure projects. Do you think the company bit more than it could chew?
The challenges really had nothing to do with the sectors we looked at.
What happened is that there was some debt that was maturing and there was supposed to be an option for refinancing.
But then there was this negative information on the market and that option disappeared. The mark of a good business is when you come out of that because it is an issue that you can’t foretell.
You get some negative information out there and your financiers get jittery and then you have to look internally.
We started looking for an internal resource-driven plan that can get the business rolling again so that we can give comfort to third parties to come back on board.
Sometimes, to hit 100 years, there are going to be years of turbulence. We will be looking at this as a spot in a long line of good things.
Looking back, do you think TransCentury made the right choice to focus on infrastructure?
We thought we needed to have a clear strategy by redefining the business so that it is well understood as opposed to being in different sectors.
We could see the future was going to be infrastructure and we feel we were right about that.
There is going to be one investment that at some point doesn’t do well. That happens and we have systems in place to deal with it.
How did you overcome headwinds?
We said let’s restructure our debt so that it matches our resources and cash flows. We did that by reducing our commercial bank debt by 40 per cent and stretching the tenure of our debt to between five and 10 years.
That gives the business some space so when they generate some cash, they can deploy some of it to working capital as opposed to paying all of it in debt.
At the same time, we have forged good partnerships with lenders because now we have an agreed way forward.
The other focus was operational excellence by doing things right so that we are not making mistakes. And then the fourth step is this fundraising to transition us from turnaround to growth.
Whom do you credit for ‘helping you out of turbulence’?
We have got an incredible group of people around here who have been able to stabilise the business out of turbulence and we are starting to see growth.
We feel good about our ability to drive growth going forward. Year-on-year we are now seeing growth in all our units.
We have been able to redefine the business within the infrastructure space so that we are able to sell the value that we deliver.
We have realigned the business to our values and what that does is it galvanises us to a similar mindset and this is one way of driving forward a business that had stumbled a little bit.
What has kept you focused on turning around the business?
This is an amazing business and the ecosystem is credible. There is an entrepreneurial culture and we are pioneering, collaborative and innovative.
You get the feeling when you walk in here that when there are challenges, the people understand it is part of our work to find solutions.
I am a believer that the old hierarchy and bureaucracy cannot solve 21st-century problems and cannot deal with the complexity of running businesses today.
When there is turbulence, it doesn’t mean you look for a business that is not going through turbulence. Our job was to make sure the business gets out of turbulence.
What leadership attributes are important for this job?
You have to want to solve problems. You have to be passionate, grounded on the family end and give a bit more time to business.
People must understand that you have to spend a bit more time on the business than in other areas. I am lucky that part of my history involved acquisitions.
So, I have seen some deals not go very well and I have studied how some people that I have worked with have responded to those situations.
It is clear that you don’t build anything by not getting involved. I don’t mind being at the front or back so long as we deliver.
Did you at some point lose key members of the teams you had built to turn around the company?
We have had people transition but our retention rate is high. We have looked at those numbers [of people who have quit] and it is not beyond any ordinary organisation.
We are a family here, we have an open-door policy, every idea must be listened to and we must hold each other accountable for performance.
When every idea is listened to, we tend to have people know that they contribute and have an impact on the organisation.
How has the past ‘political connection’ through some of your shareholders affected the business?
These people had a great vision and started doing great things that we are all impressed about. They were also successful in other areas.
I can’t say how connected they are and the real fact that can’t go away is, before 2016, we did less than five per cent of our business with the government. So, even if there were connections, I can’t link them to our business.
Does the political connection perception continue to affect investment decisions in TransCentury?
We will continue to sell our strategy and give facts about our business. There is a lot of attention in what we put out there because we get a lot of questions and we answer them.