Centum Group to launch Sh50bn private equity fund

Centum Investments Group #ticker:ICDC plans to raise between Sh40 billion and Sh50 billion in a fresh private equity (PE) fund as it seeks to cut finance costs from expensive borrowings.

The Nairobi Securities Exchange-listed #ticker:NSE firm Monday said between Sh30 billion and Sh35 billion of this amount will be sourced from high-net worth individuals and institutions such as pension schemes, with the additional Sh10 billion to Sh15 billion coming from its internal revenue sources.

The fund will largely be deployed in mature cash-generative businesses and marketable securities such as government securities and equities, group chief executive James Mworia said.

Centum, he added, will cut down on greenfield investments which take longer to generate returns contrary to shareholders’ expectations for returns in the short term.

“What we will be doing differently (under PE business) is that we will be raising third-party funds to invest alongside our own money,” he said.

“We are not looking to invest in loss-making, turn-around situations, but entities that are already profitable and have some market leadership in one form or another.”

The plan is to cut long-term debt, which stood at Sh11.38 billion at the end of September 2018, by paying them off on maturity without rolling over or renewing the facilities.

Mr Mworia said the firm was looking at using proceeds from a “robust exit pipeline of mature assets” to pay off the debts which fall due, freeing up an average of Sh1.7 billion in annual debt service bill to enhance shareholder dividend payments.

Centum has recently divested from firms such as regional micro-financier Platinum Credit and asset manager GenAfrica.

“We want to focus less on that (greenfield ventures) and more on our traditional private equity, real estate and marketable securities,” Mr Mworia said.

More exits are in the pipeline this financial year ending March 2018, he added, but declined to disclose names of target firms.

Centum has an internal cumulative return target of 30 per cent in ventures it sinks cash in, a target the Centum group chief said hit a 70 per cent performance rate in the current five-year strategy ending March 2019.

Mr Mworia spoke on the sidelines of an investor briefing following the release of half-year results for the period to September 2018.

The firm’s net profit rose 27.49 percent to Sh2.07 billion, largely on Sh1.2 billion gain from sale of 73.4 per cent stake in GenAfrica to Kuramo Capital.