The Rising Stars
All the four new entrants on the OER TOP 20 chart share a common trait – an ability to learn and react to the dynamics of a changing market. Mayank Singh reports

When Krishnakumar Gupta joined Al Anwar Holdings just over a year ago, his mandate from the board of directors was clear – the company was looking at a drastic change of direction and the new CEO had a free hand in fashioning its future course. After some deliberation and thought, Gupta realised that to make the best of the emerging market opportunities, Al Anwar needed to bring in a fundamental change in its structure and operations. Keeping this in perspective, he unveiled his vision.
Al Anwar would become a leading private equity investment company in the Middle East with a primary focus on financial services. The board backed the CEO’s vision statement. It also gave him the green signal to grow the company’s investments by 100 per cent in five years to RO20 million, with 60 per cent of this going into financial services, including insurance.

Says Gupta, “Rather than managing a company, we now manage our investments.” While the company used to get most of its revenues as a share of profit from its subsidiaries (companies in which it held a controlling stake), it now generates most of its revenues from divestments. The change of track has worked wonders for the company’s numbers: Al Anwar’s revenues shot up from RO12 million in 2006 to RO36 million in 2007, an increase of 216 per cent. Its profits have grown by 450 per cent over the year. This has helped the company to break into the league of OER’s Top 20 companies. Says Gupta, “Companies which are proactive and are ready to learn will do well in Oman.”

An open attitude
Being proactive and an ability to learn are the two qualities that are common to all the four new entrants (Galfar Engineering and Contracting, Areej Vegetable Oil, Oman Refreshment Company and Al Anwar) in OER’s Top 20 list.
Let’s take another example. Galfar, a 35-year-old company in the Sultanate, went public, with its IPO (initial public offering) on the Muscat Securities Market oversubscribed by 14.5 times, raising US$2.26 billion. This was the biggest IPO on Oman’s capital market and raised RO60 million for funding the future expansion of the company.

The public listing of a closely held company marked a watershed in the history of corporate Oman, as most of these companies have traditionally been wary of disclosure norms that a public company needs to follow. The success of Galfar has gone a long way in allaying such fears. “Our books are open, giving financial institutions the confidence to lend us larger sums of money increasing our financial capabilities,” says Hans Erlings, CEO, Galfar. The company has stormed the charts by making its debut at the No 2 position. Both Al Anwar and Galfar have shown the courage of conviction and their faith has been repaid in ample measure.
Geographical diversity

As the regional economy grows, we find that these companies have been quick to capitalise on the growing potential of the GCC market. Thus, Areej Vegetable Oils and Derivatives entered the Iraq and Yemen markets in 2007 with its blended oils. The company has had a presence in Saudi Arabia and the UAE for a number of years and the last two years has seen its market share grow by over 100 per cent. Says Prem Maker, executive director, Areej, “We export 80 per cent of our production and our first port of call is the GCC market, as the transportation costs in the region are limited.” Galfar has also been exploring possibilities beyond the shores of the Sultanate. The company is looking at executing contracts in the oil and gas space in the MENA region and in India. It points out that the return on investments in some of these markets is better than in Oman.

Al Anwar has trained its sights much higher. Says Gupta, “We are looking at diversifying ourselves geographically in the GCC and India. At a later stage, we may go to China, Brazil, Russia, Africa and Eastern Europe.” The company has walked its talk by picking up a 25 per cent equity stake in Adex Capital, a financial services company in Saudi Arabia in 2007. It has invested in Almondz Global, a securities firm in India. As companies gain scale and confidence, the best of the lot are bound to look beyond the shores of Oman.

Innovating its way
All these four companies have shown remarkable innovation in the way they have lived up to their challenges. Faced with rising input costs such as corn oil and palm oil, which have seen a price escalation of 140 per cent and 60 per cent, respectively, Areej has been quick to put in place a blending strategy. “We have been blending lower priced oils with higher priced oils. This gives our products a fine balance between price and quality.” So despite a 60 to 140 per cent hike in the price of base oils, Areej has been able to keep its costs down. The company has been forced to hike prices but these have been capped at 50 per cent. An ability to break into new markets and the blending strategy has enabled the company to grow its topline by close to 40 per cent, while profits grew by over 20 per cent in 2007.

Oman Refreshment, the franchisee for Pepsi soft drinks and Aquafina pure drinking water, faced a piquant situation. Despite having a 92 per cent market share in Oman, it realised that it faced a growth problem. Says Mohamed Harazallah, general manager, ORC, “A company can grow either horizontally or vertically. As our business is limited to Oman, there are limitations to our vertical growth (geographical spread). So the other alternative is to grow horizontally.” As a part of this plan, the company won the franchise for Frito Lay’s range of snacks in the second half of 2007. The franchise was earlier with Bahwan Foods. The company is discussing the possibility of bringing in other Pepsi products to Oman. It is confident of adding three to four new brands to its product portfolio in 2008.

Says Harazallah, “Since our competition is weak, we see ourselves as our competitors and this keeps us on our toes.” The company invested RO7 million in strengthening its production capacities last year. It installed a new can line doubling its existing capacity. Production increased from 14.5 million cases in 2006 to 16.1 million in 2007, an increase of 11 per cent. A new Aqaufina water line with a capacity of 18,000 bottles per hour and a new juice line with 7,500 packs per hour were added. The company has built a 4,000 sq. m warehouse at its factory in Ghala. These initiatives coupled with its robust performance (revenues – RO36 million and profit – RO2 million) has helped the company to make it to the OER Top 20.
As competition between investment companies intensifies and valuations for deals skyrocket, Al Anwar realised that it may get increasingly difficult to win deals on its own steam. So, the company has decided to bid for deals jointly with other investment companies on a reciprocal basis. Such quick witted thinking is what differentiates winners from the also-rans.
 

Top^