The UAE business that went from obscurity to a $240bn valuation in 3 years

Three years ago, International Holding Company was a little known company that ran fish farms and food and real estate businesses. It employed just 40 people. Today, the Abu Dhabi-listed group’s market capitalisation of $240bn is more than double that of global giants Siemens and GE and it has a headcount of 150,000.

It is an extraordinary transformation that has largely gone unnoticed outside the United Arab Emirates, and is little understood — even by bankers based in the region.

“Nobody knows,” said one Gulf-based international banker when asked to explain IHC’s dramatic growth. It is a common response to questions about the conglomerate, despite it accounting for a third of the FADX 15, the benchmark index of the ADX Abu Dhabi Securities Exchange. As its share price has soared 42,000 per cent since 2019, it has become the second largest listed company in the Middle East after Saudi Aramco, the state oil company.

Even Syed Basar Shueb, who took over as IHC’s chief executive in mid-2019, acknowledged that “it’s amazing”.

In an interview with the Financial Times, he insisted there are simple explanations for the company’s growth — the transfer of more than 40 companies, which combined are worth $4.7bn according to IHC, from Royal Group, another Abu Dhabi conglomerate. The majority of the businesses were transferred at nominal value of one dirham each, Shueb said.

Yet that explains only part of the story: IHC’s total assets have swelled from $215mn at the end of 2018 to $54bn in the third quarter of 2022.

According to IHC, this is down to the growth of the businesses it now controls. “We don’t give any dividend, the profits we made in 2020, 2021 is mainly . . . invested back,” Shueb said. “We are trying to create a giant here . . . a global giant.”

Others, however, view IHC as an example of the increasingly blurred relationship between business and power in Abu Dhabi, the UAE capital and wealthiest member of the federation. It has also sparked questions about transparency.

“It’s probably the biggest threat to the ADX because we don’t know what’s happening,” said the banker. “There’s a lot of great things happening on the ADX, and then there’s this thing that nobody knows.”

Such is the concern about the spectacular growth of IHC’s market capitalisation that officials in neighbouring Dubai no longer consider the possibility of reviving discussions on a future merger of its stock market with the ADX, people with knowledge of the matter said. 

Ernst & Young said its review of IHC’s latest financial statement, for the third quarter of last year, was “substantially less in scope” than an audit along international standards and therefore E&Y was unable to obtain assurance “of all significant matters”.

IHC said: “Due to the limited amount of information that is required to be presented in an interim financial statement . . . external auditors typically do not conduct a full-fledged audit of these financial statements.”

The company’s transformation can be timed to the period Sheikh Tahnoon bin Zayed al-Nahyan, one of the most powerful figures in Abu Dhabi, took over as chair in 2020. As well as being the UAE’s national security adviser, he is the full brother of its president, Sheikh Mohammed bin Zayed al-Nahyan, and he oversees an expanding business empire.

In addition to his role at IHC, he chairs ADQ, a new and increasingly active state investment vehicle, First Abu Dhabi Bank, the UAE’s largest lender, and Group42, an Abu Dhabi-based artificial intelligence and cloud computing company.

He also controls Royal Group, a holding company that owns 62 per cent of IHC. About 24 per cent of IHC’s shares are freely floated, with more than 90 per cent of investors from the Gulf.

Shueb said Sheikh Tahnoon’s vision for IHC “was limited to creating value for the shareholders”.

“How we create [value] is cascaded to the management,” he said.

He dismissed scepticism about what had driven the rapid share price growth, saying it was a “little bit of ignorance of the bankers who are not looking at it properly”.

“The investor who is willing to invest at this market cap, it is only because they have done their homework well because they can see those assets have a significant value,” he said. “I believe people are anticipating that those certain assets that are still outside [with Royal Group] will come to the IHC group . . . which I’m not denying, it’s likely they will come.”

Shueb sought to explain the group’s goal as “one simple thing — [to] create value for our shareholders by investing in different portfolios, not one stream of investment”.

“We do the acquisition, we do the synergy, immediately next we go for diversification,” he said.

As an example, he said if IHC bought a telecoms company it would integrate it on the services side of IHC, and expand into “solutions” and “hardware sales”. In agriculture, the plan was to supply food from “farm to table”.

He added that the company has a $10bn war chest for investments and is targeting group revenue growth from $7.7bn in 2021 to $27bn in 2023, largely through acquisitions.

“Our five-year plan is to reach 1tn dirham [$272bn] in revenue at least, in acquisitions, and our own businesses are doing very well,” Shueb said.

Deals by IHC in 2022 include investing $2bn in three Mumbai-listed companies that are part of the empire of Gautam Adani, Asia’s richest man, $500mn to buy a 50 per cent stake in a Turkish clean energy company, and a $2bn offer to buy up to 31.25 per cent of Colombian food group Grupo Nutresa.

Shueb attributed IHC profits of $6.5bn in the first nine months of 2022, a 236 per cent increase compared to the same period in 2021, largely to investments, including its stake in the Adani companies.

Shueb said IHC’s focus was on tech, healthcare, real estate, construction, food and agribusiness and general investment. Geographically, its attention was on Asia and Latin America and it is looking for deals in markets as diverse as Turkey and Indonesia.

“These are progressing economies; they have population; they have reasonable systems to support all this growth and at the end of the day, because we are from Abu Dhabi and UAE population is only 10mn, I cannot . . . reach 100mn population but I can reach 100mn through these companies,” he said.

He added that IHC was also “looking at certain deals” in the US, where it already has some holdings, including a stake in Elon Musk’s SpaceX. However, he viewed Europe as “a very uncertain market right now”.

“We are getting a lot of very good deals [in Europe], but [we] don’t know if these good deals will stay good,” he added.

Asked why there was no independent research on the group despite its size and dominance of the ADX, Shueb said “it’s up to them if they want to do it or not”.

“When I go to the market for any IPO for my companies, I get enough questions from the local investor base . . . they have enough research on our financials,” he said. “Our books are very open.”

IHC has had discussions with a credit agency about a rating, but that process hit a stumbling block when the agency asked what to compare the group with, Shueb said.

“The team are still working [on the rating and] most likely will find a solution,” he added.

He said IHC had debt of about 10bn dirham, excluding operating debt at portfolio companies, and would look to increase its borrowing as it expanded. The group had begun developing relations with international banks, he added, including securing a loan of “several billion dollars” from Standard Chartered and was engaging with Goldman Sachs and UBS.

Others still need convincing of the group’s strategy.

“I don’t understand it because it’s a $200bn market cap company that files less disclosure than entities significantly smaller than that, and the whole complex of listed and unlisted subsidies that are highly active,” said another Gulf-based banker.

However, “it’s such an important source of deal flow that I’m sure some banks are examining what they can do,” to get involved, he added.