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Now Nakumatt snubs external financing.....
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My 2 cents
#1 Posted : Wednesday, June 09, 2010 2:10:58 PM
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Nakumatt for a long time now have been talking about either an IPO or private equiting financing. Things were rather thick for them cash flow wise last year after the CBD fire and the Thika road demolishment. No wonder smart points were reduced to 1 shilling .

Suddenly I see it in the the news that 'things have improved' and they have now turned their noses up on external funding.

What's it with these guys???
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FundamentAli
#2 Posted : Wednesday, June 09, 2010 2:29:38 PM
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Nothing wrong. Find out what is happening in the financial circles and especially with banks that are 'close' to them. Maybe credit has become cheaper locally.
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VituVingiSana
#3 Posted : Wednesday, June 09, 2010 9:25:03 PM
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Kwani? Doesn't a jamaa or firm does have the RIGHT not to ask for money/loans/equity if not needed?

@my2cents - What's your beef with Nakumatt? Were you one of the 2 potential Equity investors?
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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mukiha
#4 Posted : Thursday, June 10, 2010 7:45:29 AM
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The two suitors were probably South African, and looking at their performance in this country, I can understand why Atul Shah walked away...
Nothing is real unless it can be named; nothing has value unless it can be sold; money is worthless unless you spend it.
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VituVingiSana
#5 Posted : Thursday, June 10, 2010 7:50:45 AM
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mukiha wrote:
The two suitors were probably South African, and looking at their performance in this country, I can understand why Atul Shah walked away...


Satya Capital: Sudanese/UK. Mo Ibrahim who sold Celtel to Zain

Kingdom Holdings: Saudi fund. Alwaleed Bin Talal
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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My 2 cents
#6 Posted : Thursday, June 10, 2010 7:56:38 AM
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One suitor was actually Sudanese (one of the richest Africans I believe). My beef with Nakumatt is that they almost seem to fear going public. What are they hiding? I will never forget one year in which they paid KRA 60million in taxes while a struggling Uchumi paid over 500million. Do they fear that by going the IPO way they will have to lay their bare their books for scrutiny?
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VituVingiSana
#7 Posted : Thursday, June 10, 2010 8:09:03 AM
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My 2 cents wrote:
One suitor was actually Sudanese (one of the richest Africans I believe). My beef with Nakumatt is that they almost seem to fear going public. What are they hiding? I will never forget one year in which they paid KRA 60million in taxes while a struggling Uchumi paid over 500million. Do they fear that by going the IPO way they will have to lay their bare their books for scrutiny?


Nonsense (well, some of it)!

Going public has little to do with 'fear'. Many of the world's most successful firms are private coz they can make decisions independent of the (often) short-term needs/wishes of funds, etc. Some public firms controlled by individuals will also act (almost) private like Berkshire Hathaway.

Mars (the chocolate maker) is notoriously private as are many other mid-sized global firms... BTW, BH has an investment or deal with Mars...

What you need to ask is why do firms go public?
(BTW, Nakumatt was NOT going public but planned to raise cash thru a private placement) Are they raising cash? Do the shareholders want out? Price discovery?

On the taxes... Unless you have the detailed financial statements, I think you are blowing hot smoke! I am a fan of KenolKobil & they faced some criticism from some idiots regarding taxes, etc... I am a defender of private businesses vs the blood-suckers in GoK or its entities!

Profits are NOT equal to Revenue... A smart firm will avoid taxes by taking tax credits & investment allowances... Nakumatt unlike Uchumi has been going into locations OUTSIDE of Nairobi & Mombasa thus qualifying for these tax credits/allowances...
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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Sasha
#8 Posted : Thursday, June 10, 2010 8:47:50 AM
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@mukiha: I believe Ramamurthy is the one who walked away (actually was pushed) and Atul Shah is the current MD!

Ramamurthy was forced out because the family was not sold on the plans to raise capital via a private placement. Ramamurthy is a bright guy. He knew that a private placement would lead to the family ceding some control of the company and thus, he would become more an employee of a board rather than an employee of the family. It is rare to see a successful Indian family-owned business going public coz they normally guard their business vigorously from external influences.

Nakumatt's strategy all along has been expanding their business through huge malls and hypers. I don't understand why they now seem to have reverted back to shops as seen with the acquisition of Woolmatt. If they wanted to regain their CBD shoppers, they should have sourced for a bigger outlet to establish themselves. Easier said than done I know, but it woulda been better than opening 4 shops in CBD!
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VituVingiSana
#9 Posted : Thursday, June 10, 2010 9:06:39 AM
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@sasha: Finding a large space in Nairobi is tough! The trend has been smaller 'exhibition' stalls...

Why? Coz these stalls are way more profitable for developers...
I read on Wazua that these stalls command HUGE premiums/goodwill (I bet its off the tax books) so why lease to Nakumatt who will not pay rent in 'cash' & no off-the-books goodwill either?
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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Sasha
#10 Posted : Thursday, June 10, 2010 9:16:21 AM
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@VVS: Agreed! What I'm not getting is opening all these shops from Mama Ngina to Moi Avenue. I believe their costs will also increase significantly and thus cause a further drain on cash flows.

I understand that Uchumi are also shopping for a 'large space' in the CBD which has been hard to come buy. There seems to be a scramble for CBD shoppers!
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VituVingiSana
#11 Posted : Thursday, June 10, 2010 9:34:39 AM
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@sasha - When I was in the USA... the suburbs had large stores but the city/CBD had small stores which concentrated on selling FAST MOVING CONSUMER GOODS (FMCG)...

Nakumatt already has Lifestyle with parking for big items... lakini the TARGET market for these 'small' stores is the office worker who needs a few items they can carry when they take matatus/buses or share a car!

These stores are not for large ticket items... plus parking in town to go shopping is no longer feasible or convenient...
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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Sasha
#12 Posted : Thursday, June 10, 2010 9:57:28 AM
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@VVS: Makes sense, but I was of the impression that office workers mainly go to Tuskys which you will find near every stage. Can the customer traffic support the business in the long-term?

Tuskys have also taken up this strategy of big malls in the suburbs. I hope Mukuha knows what he is doing.
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VituVingiSana
#13 Posted : Thursday, June 10, 2010 10:54:28 AM
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Sasha wrote:
@VVS: Makes sense, but I was of the impression that office workers mainly go to Tuskys which you will find near every stage. Can the customer traffic support the business in the long-term?

Tuskys have also taken up this strategy of big malls in the suburbs. I hope Mukuha knows what he is doing.


I think Nakumatt is competing with Tusky's in CBD. Note that Nakumatt might be suited to the guys with cars, etc... but there is a lot of overlap...

Remember the old Uchumi - Market Branch (near Jamia)? It is now Tuskys
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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My 2 cents
#14 Posted : Thursday, June 10, 2010 12:12:22 PM
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@Vituvingisana...just to refresh your memory, before the talk of private financing, Nakumatt had indeed talked about an IPO. Check old records. The bear market made this option unattractive.

And who says that by going public you necessarily cede control? You yourself have given the example of BH.

Nakumatt has a lot to gain (PR -wise)by being viewed as a truly local company and they try to play this up in the adverts. If I were the MD of Uchumi I would really belabour on the fact that we are 'local' and have the mwananchi as shareholders as opposed to some tightly family controlled outfits.
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Obi 1 Kanobi
#15 Posted : Thursday, June 10, 2010 1:13:19 PM
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Ramamurthy lost his footing at some point and thats what even led to his dismissal.

Atul looks more poised and should steady the company as the aging founders try to decide on a succession plan.

I suspect Nakumatt is suffering from the Asian business syndrome, where the grandfather creates the nucleus, the son's grow and mordernise it but the grandsons opt to live in the UK, Canada, US or Singapore and only call to ask for their monthly allowances.

They will eventually sell, just like CFC did.
"The purpose of bureaucracy is to compensate for incompetence and lack of discipline." James Collins
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VituVingiSana
#16 Posted : Thursday, June 10, 2010 8:08:36 PM
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My 2 cents wrote:
@Vituvingisana...just to refresh your memory, before the talk of private financing, Nakumatt had indeed talked about an IPO. Check old records. The bear market made this option unattractive.

And who says that by going public you necessarily cede control? You yourself have given the example of BH.

Nakumatt has a lot to gain (PR -wise)by being viewed as a truly local company and they try to play this up in the adverts. If I were the MD of Uchumi I would really belabour on the fact that we are 'local' and have the mwananchi as shareholders as opposed to some tightly family controlled outfits.


This is all academic... Ultimately, they can decide what path they want to take... The point is that CHEAPER bank financing might have been key to their decision.

A few years ago the bond market was being touted but then the banks started syndicating loans at lower rates as well as the EASE of getting money versus bonds...

I think the overall 'cost' of the new financing might be cheaper than taking on Equity...

Look at KenolKobil who has the heft to go out for short-term money!
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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mukiha
#17 Posted : Friday, June 11, 2010 10:15:27 AM
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A clarification is necessary: Atul Shah has been the MD of Nakumatt for a very long time. He did not come in to replace Ramamurthy!

Ramamurthy was "Operations Director" - reporting to Atul, the MD. Only thing was that Ramamurthy had become the PR face of Nakumatt.
Nothing is real unless it can be named; nothing has value unless it can be sold; money is worthless unless you spend it.
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