The ADX-listed Eshraq Investments is getting ready to introduce a new operational plan that will involve looking into private equity prospects in Saudi Arabia and the United Arab Emirates.

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These would come in the shape of $50 million to $100 million investments in businesses that Eshraq thinks have the capacity to expand and yield the profits it is looking for.

The shift in focus from Eshraq’s previous majority reliance on publicly listed firms to private equity was disclosed late last month. Eshraq was supposed to concentrate on markets other than the United Arab Emirates, and Saudi Arabia seemed like a good fit.

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Over the past two to three years, early-stage and tech entrepreneurs have been targeted by private equity groups. The Saudi wealth fund, PIF, has also made moves in this area.

a well-defined path to the exit
If the exits go as planned, private equity investments can be quite successful. Such an option currently exists in Saudi Arabia and the United Arab Emirates, whether it be through going public on the stock market or selling to other strategic investors.

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Regarding if Eshraq will also target technology-focused companies, CEO Mohamed Al Hashimi stated: “We will be sector-agnostic on investments.” One cannot be overly sector-specific in the Gulf or Middle East markets; instead, one must be an opportunist.

“We can create value via asset managing and value extraction when such an opportunity arises. In a perfect world, we could have an exit strategy in two to five years. And you can even sell it after five to seven years if it’s a very fantastic investment.

“The UAE and Saudi Arabia will be the main regions of our private equity entry. And if those chances go, we may search elsewhere, like in Kuwait or Qatar.

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A keen reset It has long been clear that Eshraq needs a shift in pace and direction. The company’s recent financial results were deemed unimpressive by investors, and a significant amount of its portfolio consisted of UAE real estate, both properties and plots.

Al Hashimi was named CEO to manage the changeover as a result. In order to raise more money for upcoming private equity investments, Eshraq recently sold off a portion of its real estate holdings in the United Arab Emirates.

Real estate holdings

The business will take into account four real estate options:

Create plots that can be leased or sold.

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Getting Money

The CEO stated, “Controlling the investments and divestitures as we move from public equity to private equity is one of our main priorities.” “Using the funds on hand would be the second alternative. Attracting strategic investors or obtaining funding from new investors would be the third.

“We are unable to raise or use funds using our prior approach. Rebalancing our current portfolio (and obtaining additional funds) is the new approach.

“Special purpose entities (SPVs) will be used if our anticipated private equity investments are exceptionally substantial in scope. The process will be entirely in line with the methods we follow and unique to each investment.

Reduce the buyback of shares
One avenue that Eshraq is no longer pursuing is a share buyback scheme. “To make sure shareholders received good value, we extinguished the shares that we bought in the last two years,” Al Hashimi stated. “We are not currently conducting a buyback; we will only do so in the future if it makes sense.”