8 INSIGHT Siraj Capital Transparency is key Last month, Tafaseel, a Saudi-Arabia based firm that owns the brand Lomar (a leading designer and retailer of men’s thobes and accessories) received USD 4 million growth capital from Afkar Development Investment, an affiliate of Siraj Capital. ACQ’s Charlotte Abbott speaks to Hisham S, E-Farouki, Vice President of Private Equity, at Siraj Capital about the investment and merchant bank's “white box" approach to investment. ra] Coptal, the Saudkrabla based merchant investment an finance company wes founded three {ears ago.by its no Chalrmon, Or GhasonASulaiman {nd Sra Capital CEO, rahi Margam-ey. A the rmoment the company If working on 9 number of Pmandates and has recently sponsored» maj same Finance summit in London where ftv recognized 9 the “Best” same Wealth Management Sere Provider The Sal based investrent group operate in Saud aba, GCC the Middle East and North Aa (WENA, ‘within thes ns of business lami nance Business Developmentineubation and Private Equity, which sham head vp. “the fit line of busines, samic finance capital raket, where we provide sor structure sence, {eoregional and global corporations, who ae interested In taping the Ware nance ane special the Sule “he second line of business, development and incubation, i when Sra) Capital partners ith» recognised international group, oF a sector specialist management team, incvbating and creating 8 joint entre within the Saud markt. “Recently we wanted to enter the hospitality lodging sector, especialy the budget tree tar space where we feel there is tremendous undererved market ‘opportunity so we parnered wth the Intercontinental hotel group, and obtained the rights to develop the three star budget Holday Inn Express brand in Saudi Arabia. We wl be looking to develop a number of Droperis throughout the Kingdom over the coming Bayar” Siraj Capital's third ine of busines, priate equity which specfcally focuses on growth capital ‘pportunies encapsulates the company uniaue sling point, Siajs Wansparent “white box” approach £0 Siraj Coil doesnot sue oF raise sector secfc or ‘opportunity base funds, the merchant bank partners ‘ath ite snreholders to invert and create value In ‘rious portale companies, je area merchant Investment company and basically we utiize and keep asets on our balance sheet We have 2 group of shareholders that provi ut ‘with capital and we use that balance shet to west ‘ariout portale companies” Using a "white box" deal by deal approach, Sia) Capital identifies the opportunity fst, and then strtures the transactions ung thet own capital. At {his point] Capital inues thee shareholders 0 co invest independently alongside raj apa ' very much a ansparent approach to PE as our shareholders know what deal they are Investing In before they agree so the invesent. Every dolar of ‘ur sharenlders capitals invested ypectcly in that articular opportunity rather han asa smal part of 2 ‘wider fund hat may havea strategy of ivesting in 8 broed area for exatpl the gee and ol tector Once the nvestmentismade we attempt to lst improvedINSIGHT 9 Siraj Capital “The fist line of business, Islamic finance capital markets, is where we provide advisory structure services to regional and global corporations, who are interested in tapping the Islamic finance and specifically the Sukuk markets.” corporate governance standards within the Portflio {Company and repor regulary our shareholders and partners on performance, busines strategy ste. The tnt proces isnot only Wansparent bu ensutes th i stakeholder interes ar ul aligned, forcesusas Manage’s to originate and stracure exceptional transactions. We Belews this tobe a sustalnabl value fd model” another differentiator isthe fact that we are actualy headquartered In Jeddah, witha team onthe {round in Saud Arabia, a oppose to avast marty Gt investment and private egulty funds which are based fut ofthe Gull Dub o® Bahrain ete We fee is Drowder us wth areal competitive edge. Some of tne paces’ we have invested in are tremendously Underserved. To date, 100% of the investment have closed have Been proprietary, allowing ust ‘negotiate tremendous terms and ent valuations. Dut presence in Saul Arabia really gives us the ‘undorretal envance of what's happening inthe sale Targert country in GCC and it oreaty enhancer our cotigintion and deal execution capability. Thi i ‘becoming ineessngy important at there hasbeen 8 jhenomenal shift In the number of Intemational bartels and investors seeking to come inte the Saud ‘markt hiserialy companies and investors, wanting to center the regions market, would come vt usr out Dubai ofice, now they come to usm Jeddah. They want 19 go out into the cities mest with relevent aries, gauge what he busines enone ke In Sau Arabi and look at what opportunites has to ofer| Corporate Governance Alongside transparency, the importance of effective Cexpotste overance should nt be igored, expecially Inthe MENA region and Sau Arabia. “one cannot under estimate the importance and the eal value corporate governance. brings to an ‘organisation, Tone of thecal esves we look to enforce when Derspecive, converting the agreed shareholders afeement and term sheet into asjstematic aclonable fetin pan requires alot of time and effo, a we 2 the wilingnes and co-operation ofthe managernent {eam implementing and enforcing good corporate Ssovernance ana regular portaio company montoring angaras can be very acl. “Corporate Governance simportant inmost areas ofthe worl but expecaly inthe markets we operate i, a3 Iovofthe companies have great busineses operating na seat space but ther tena workings tend tobe rele fru pa HR, nance ane accounting proces inary (ses, have tbe completely revsed and improve.” ‘The story has just begun.. Siraj Capital Inveseg USD 4m of capitan Tafassel, through i Saud Arabian vehicle, Akar Development Company, Tafsael owns the Lomar brand which i 3 leading designer and retaler of men's thobes and sccesories insu arabia. Prortothe investment, Sa Capital had been in tks sth Tafsael or een month. Lamar is eatvely young company but they have creates strong brand, whe hs receved tremendous fecogniton. Lomar has been recognised nTime Magazin, participated in bal Fashion Week and has atlintions wth Mercedes Bea. Last year they offeres 2 tailor made tomar thobe with every Mercedes Sen {edna arab. “The MENA clothing market approximately 300n in ‘sae andthe SCC etal market sone ofthe large 398 fastest growing sector inthe economy. “We were keen on the company because of the ssrengn of the brand inte local market and becavse of ts performance Lomarfcrtenl doing 5 times ‘the inustry average, in terms of sprit margins. ‘he US, most companies look too $300 dolas per "square fot n sales, omar saved doing 2103 times that which esl quite impressive, especialy when {you consider they operate in the Saudi marke. “re etal sectors seeing verendous growth at the oun tie sac@10 INSIGHT Siraj Capital Aco vc) “We are a merchant investment company and basically we ufilze and keep assets on our balance sheet. We have « group of shareholders that provide us with capital and we use that balance sheet to invest in various portfolio companies.” ‘moment as shopping sone af the resions most popuat Tesure actives The cemana I being spues by spots income and an expansing fasnonconsience Population The tata for this ecto compat lg the Fetal per canta figures you se in the US or UK, which Provides ur th amp room fr continues growth ho ‘re 60% of population, ane ofthe fastest rong the ‘ol, are below the age of 25. “The investment trom Si will be used for Lemar expansion terms of estos, new bse nes and ' cenralted busing fy. atthe moment Lomor hs four locations, 50 there ‘wemendo.s opportunity © grow andopen up morestoes fn the ground though out he Kingdom a el GCC There are aso. some very intersting tancing pporsnses, Incsing working wth eng depart oer to cete 3 "ore withins roe” cone Tight now Lam suing a centalsed bling acy hich isdue or conplton in Oxober Novenber omar ‘makes evry thing mage to mesrure, 0th fit ll ‘herease apo and improve tur taund ne. Regarding nev business lines, there are ‘opportunities to develop complimentary lines to {omar’s main offering of thabes, suchas the inner armen, the head gear accessories, a ready to Wear line, and evertualy a womans ine Weare ao werking on developing a seconde band separate rom Lama, which we ate ver exces about “or uy we really fel hr an epportniy for 10 make an Inestnentqute ery an ina business, with 2 ‘old plain tat cou God wing, tunsntoaregion Faiph auren or Prada” 2008 ‘swith other pats ofthe world, 2008 was 2 volatile {year for mor which had major inpieations or he KSA. {nd regional market. Hisham breaks dovm this change Into tree stages Shock, Caution an Appetite. Shock "Atte end of 2008, October to December, there was shodk phase inte region, due tothe colapseLeNnan Bros, 6 andthe near ealapie of Cisgroup. These bg brands had been extremely active in the region ang many of the major merchant trading famles and inritutons had signfeantreltonshipe with tem, the last quarter of 2008 people were gue tothe’ TV sets and the question om everyone’ i as, what is ‘going on and how sth going to affect ust” Caution "As we entered the fst quarter of 2008, the region ‘entered » cautious period where investment appetite Wes low. Everyone seemed to take @ walt and seeINSIGHT 11 Siraj Capital “Historically companies and investors, wanting to enter the region's marke! would come visit us in our Dubs fice, now they come to usin Jeddaih. They want to go out into the cities, meet with relevant parties, gauge what the business environment is like in Saudi Arabia and look at what opportunities it has to offer.” approach, asreprtsin the news documented the eects ff the guity euneh in Dba and Sud Arabia ‘one of our Dubs based fms was Wt hard bythe Niguiaty crunch as they were having 2 haré time Collecting thei accounts receive. “at uemomente are working very des with them, ing to diversify their busines model and geographical ope nto new markets, for exampie Saud Arai, where lear seeing continued growth thei nasty” Appetite “In May his year webegan tosee another shiftin market sentiment. At the manent we fe seing sneeasing Investment appetite, a5 2 lt of lvestors and our Shareholders pervners have started to think about re postoning themselves in the curent market pace and Seeing Mow they can make real ale add investments” 2008 was nt aldeom and looms iceraly was 8 good year for Siraj Capita, as they focused on Strengthening thel team and false acaptalincease”™ “amidst the wotse frandal css n decodes, we were able to consuate and frase a cptal erase or Sia opta. During the fs quarter of 2008, within hi ery dha undratng endearment we were able tong on board net only new money but a nuber cf new sate sSorenodery voreting that wat 2 9008 win fr "Our performanee levels acess the boat were alo enhanced with the adstions of key members 29 our interal legal course tear, aswell tothe private uty and business development teams. Indeee, seven out ofthe nine porttlio companies ‘that Sir) Capital nas across both. the business development and private equity portfola, continue ther growth story. “Thee companies continu to perform, grow and are weathering the stor. The cr story in Saudi Arba remains compelling: strong local consumption, ring population leading to increased market demand and Targe-sale government expenditure” The future "Intrnaliy, we expect tohave very busy and hopefully promising last quarter in 2009 andy al accounts, ight ow, 2010 looking ike goodyear in the Kingdon. Idom't think we will go bock tothe exuberance of 2004 - 2008 but | think we are on an upward tik ‘omardsthe end of 209, nto 2070 “Tao think investors ate going tobe weary ofthe ‘term “fund". More and more investors inthe region wont transparency in deal making whic Siraj Capita Provides, "white box” rather than “back Box", fund Tke approach” ACG oO SIRAACAPTAL, ese ut oun tie sac@