Biography of The Abraaj Group: Early Life, Investments, Challenges, Success
Biography of The Abraaj Group:
The Abraaj Group, founded in 2002 by Pakistani businessman
Arif Naqvi with an initial capital of US$3 million, swiftly grew into a global
private equity firm operating across six continents. The firm's early success
included the closure of a nearly US$1 billion fund for Sub-Saharan Africa in
April 2015, followed by a US$375 million fund for North Africa later that year,
setting a record for funds raised in a single year for investments in Africa.
Strategic Ventures and Challenges
In a bid to expand its reach, Abraaj raised $526 million in
2016 for investments in Turkey through the Abraaj Turkey Fund I. Additionally,
the firm launched the $1 billion Abraaj Growth Markets Health Fund (AGHF) aimed
at improving healthcare access in Sub-Saharan Africa and South Asia.
Financial Turmoil and Accusations
However, by 2018, the firm faced significant turmoil when
allegations surfaced regarding the misuse of investor funds. Investigations
revealed financial irregularities, prompting major limited partners such as the
Gates Foundation to probe the matter and appoint auditors to track investor
funds. The turmoil resulted in the departure of key executives, including the
CFO and CEO.
Liquidation and Asset Sales
By early 2019, Abraaj reported a substantial loss of $188 million
and accumulated debts totaling $1.1 billion, including significant sums owed to
both secured and unsecured creditors. In April 2019, one of its directors was
arrested, further exacerbating its legal and financial challenges.
Legacy and Asset Redistribution
In the aftermath of its downfall, Abraaj's various funds
were sold off to other private equity firms. Colony Capital acquired its Latin
America business, Actis Capital took over operations in the Middle East,
Africa, and Asia, while TPG Capital's Rise Fund assumed control of its
healthcare investment arm.
The rise and eventual collapse of The Abraaj Group serve as
a cautionary tale in the world of finance, highlighting the risks associated
with rapid expansion and the importance of transparency and governance in
managing investor funds.
Business Segments of The Abraaj Group
Private Equity and Impact Investing
Before its liquidation, The Abraaj Group operated across
several business segments, primarily focusing on private equity, private
credit, impact investing, and real estate. The firm was renowned for its
investments in global growth markets, spanning over 200 ventures across diverse
sectors.
Diverse Portfolio of Investments
The Abraaj Group's portfolio included significant
investments in various sectors and regions:
K-Electric: A major player in Karachi's electric supply
sector.
Acurio: A prominent Peruvian restaurant group.
Hepsiburada: Turkey's largest e-commerce platform.
Java House Group: East Africa's leading casual dining chain.
Netlog: Turkey's largest integrated logistics company.
Indorama Fertilizers: Manufacturer of fertilizers in
Sub-Saharan Africa.
VUS: A leading educational institution in Vietnam.
Big Basket: An e-grocer serving customers in India.
ODM: Provider of oncology and diagnostic services healthcare
platform in Morocco.
Impact of Liquidation and Asset Transfers
Following its financial troubles and liquidation
proceedings, The Abraaj Group's assets and management rights were transferred
to other entities:
Colony Capital: Acquired management rights to Abraaj Latin
America Fund II, Abraaj Turkey Fund I, Abraaj North Africa Fund II, and Abraaj
Africa Fund III.
Actis: Took over management rights for Abraaj Private Equity
Fund IV (APEF IV), Abraaj Africa Fund III (AAF III), Abraaj North Africa Fund
II, and Abraaj South East Asia Fund II.
These transitions marked the end of The Abraaj Group's
legacy as a pioneering investor in emerging markets, underscoring the
complexities and risks involved in managing large-scale private equity
operations.
Abraaj Group's Diverse Investment Ventures
Private Credit
The Abraaj Group cultivated a robust portfolio in private
credit investments, strategically diversified across sectors and geographies
within emerging markets. Emphasizing mezzanine debt as its primary focus, the
firm also engaged in senior debt investments where opportunities aligned.
Biography of The Abraaj Group: Early Life, Investments, Challenges, Success/ Pakistani businessman Arif Naqvi/ Investment/ Equity firm / Fraud
Impact Investing
Abraaj was a significant player in impact investing,
particularly in healthcare and clean energy sectors. Through its US$1 billion
healthcare fund, the firm collaborated with healthcare technology companies,
foundations, and institutional investors to tackle healthcare challenges in
Africa and Asia. Notable investments included Care Hospitals in India and
Islamabad Diagnostic Centre in Pakistan. Abraaj also partnered with the
International Federation of Red Cross and Red Crescent Societies to enhance
healthcare access in Kenya.
In the energy sector, Abraaj invested over US$1 billion,
partnering with ENGIE for a wind power platform in India and acquiring a
majority stake in Jhimpir Power to develop a 50 MW wind project in Pakistan's
Jhimpir wind corridor. Additionally, a collaboration with Aditya Birla Group
aimed at building a 1GW scale solar energy platform in India underscored
Abraaj's commitment to sustainable energy solutions.
Real Estate
Abraaj's real estate investment arm focused on various asset
classes, leveraging urbanization trends and increased consumer spending to
generate attractive returns. This strategic approach aimed to capitalize on
underlying growth fundamentals in targeted markets.
Legacy and Transition
Following Abraaj's forced liquidation, TPG Capital assumed
control of the healthcare fund in May 2019, marking a pivotal moment in the
transfer of its impactful investments to new management. The transition
underscored the complexities and challenges faced in maintaining operations
amidst financial turbulence, highlighting lessons in governance and
sustainability in private equity ventures.
Energy Ventures and Sustainability Initiatives of The Abraaj
Group
Energy Sector
Abraaj's energy division, known as Themis, underwent a
significant transformation in December 2017. The team, rebranded as Themis,
departed from Abraaj to collaborate with a US-based investment firm. This
strategic move relocated the Themis team to Morocco, refocusing their efforts
on the African power market. This shift aimed to capitalize on emerging
opportunities in sustainable energy solutions across the continent.
Sustainability Initiatives
The Abraaj Group was committed to sustainability and social
responsibility, exemplified by its involvement in various initiatives:
UN Global Compact: In 2012, The Abraaj Group became a
signatory to the UN Global Compact, demonstrating its dedication to ethical
business practices and sustainable development goals. CEO Arif Naqvi's
appointment to the Board of the Global Compact underscored the firm's
leadership in promoting corporate responsibility on a global scale.
Abraaj RCA Innovation Scholarship: Established in 2014, this
scholarship at the Royal College of Art in London was the largest of its kind
for postgraduate studies in the creative sector. It aimed to empower future
innovators and foster creativity in diverse fields.
Abraaj Group Art Prize: Launched as a flagship arts
patronage program, the Abraaj Group Art Prize aimed to support contemporary
artists, particularly those underrepresented in the global art scene.
Celebrating its 10th anniversary in 2018, the prize provided crucial resources
for artists to further develop their talents and gain recognition.
Abraaj Growth Markets Grant: Introduced in 2015, this
initiative supported projects addressing socio-economic challenges in growth
markets worldwide. Projects funded included the development of myoelectric
prosthetic limbs in Kolkata and efforts to enhance public safety through crime
pattern tracking in Puebla, Mexico. These grants aimed to foster innovation and
positive societal impact in communities facing diverse challenges.
These initiatives reflected The Abraaj Group's holistic
approach to business, integrating financial success with sustainable practices
and social impact. Despite its challenges and eventual liquidation, Abraaj's
legacy in promoting innovation and sustainability continues to resonate within
global development and investment communities.
Investment Strategy:
Naqvi's strategy focused on deep understanding of local
markets. Abraaj operated through a network of local offices staffed with people
from diverse backgrounds. This approach helped them navigate challenges and identify
promising investment opportunities.
Successes and Investments:
Under Naqvi's leadership, Abraaj grew into a major player in
private equity, making over 200 investments across Asia, Africa, and Latin
America. Their portfolio included significant stakes in companies like
K-Electric in Pakistan and Acurio in Peru.
Latest developments concerning The Abraaj Group:
2019:
April: The US Securities and Exchange Commission (SEC) filed
a complaint in New York alleging that Abraaj CEO Arif Naqvi misappropriated
approximately US$230 million from the Abraaj Growth Markets Health Fund, using
it for unrelated corporate purposes. Naqvi was subsequently arrested in London
upon his extradition from Pakistan and faced legal proceedings.
July: The Dubai Financial Services Authority fined Abraaj a
record $314.6 million for deceiving investors and unauthorized activities,
despite the uncertainty of recovering the fine due to Abraaj's liquidation.
August: Arif Naqvi was sentenced to three years in absentia
by a UAE court in a case brought by Air Arabia PJSC, where he was a former
board member.
April: Sev Vettivetpillai, a senior Abraaj employee, was
arrested and later pled guilty to serious financial crimes related to Abraaj.
2021:
January: A UK court ruled that there were no barriers to
extraditing Arif Naqvi to the US to face fraud allegations.
July: Dubai Financial Services Authority imposed a $1.7
million fine on Abraaj's former CFO, Ashish Dave, for misleading conduct.
November: Abraaj's liquidated units filed a $600 million
lawsuit against KPMG LLP, alleging negligence and breach of duty during audits.
2022:
January: Dubai Financial Services Authority fined Arif Naqvi
approximately US$135.6 million and former COO Waqar Siddiqui approximately
US$1.2 million for their roles in Abraaj's collapse.
October: Waqar Siddiqui settled a US$1.15 million fine
imposed by the Dubai Financial Services Authority for failings related to
Abraaj.
2023:
March: Arif Naqvi lost his challenge to the extradition from
London to the US, paving the way for his trial in the US on fraud charges.
Timeline summarizing the rise and fall of The Abraaj Group:
2002: The Abraaj Group is founded by Arif Naqvi with an initial
capital of US$3 million.
2015:
- Abraaj closes a nearly US$1 billion fund for Sub-Saharan Africa.
- Raises US$375 million for a fund focused on North Africa.
2016:
- Raises $526 million for investments in Turkey through Abraaj Turkey Fund I.
- Launches the $1 billion Abraaj Growth Markets Health Fund (AGHF) to improve healthcare access in Sub-Saharan Africa and South Asia.
2018:
- Allegations surface regarding misuse of investor funds.
- Investigations reveal financial irregularities.
- Significant turmoil leads to the departure of key executives.
- The Gates Foundation and other major investors launch probes into the matter.
Early 2019:
- Abraaj reports a substantial loss of $188 million.
- Accumulated debts amount to $1.1 billion.
- One of its directors is arrested.
April 2019:
- Abraaj begins liquidation proceedings.
- Various funds and assets are sold off to other private equity firms.
May 2019:
- TPG Capital's Rise Fund assumes control of Abraaj's healthcare investment arm.
2021:
- January: A UK court rules that Arif Naqvi can be extradited to the US to face fraud allegations.
- July: Dubai Financial Services Authority imposes a $1.7 million fine on Abraaj's former CFO, Ashish Dave, for misleading conduct.
- November: Liquidated units of Abraaj file a $600 million lawsuit against KPMG LLP for negligence during audits.
2022:
- January: Dubai Financial Services Authority fines Arif Naqvi approximately US$135.6 million and former COO Waqar Siddiqui approximately US$1.2 million for their roles in Abraaj's collapse.
- October: Waqar Siddiqui settles a US$1.15 million fine imposed by the Dubai Financial Services Authority.
2023:
- March: Arif Naqvi loses his challenge to extradition from London to the US, paving the way for his trial in the US on fraud charges.
This timeline captures the key events from Abraaj's
foundation to its legal and financial challenges, eventual liquidation, and
ongoing legal proceedings involving its former executives.
