UAE Exchange takes on global expansion

UAE Exchange plans a global expansion drive following a cash injection from an Abu Dhabi investor, as the Emirates' private sector starts to witness an easing of its recent funding crisis.

UAE Exchange aims to expand to 53 countries this year, from 29 countries at present. Sammy Dallal / The National

UAE Exchange plans to almost double its international reach in the year ahead after reaching an acquisition deal with an Abu Dhabi investor.

The news comes as the funding crisis of the past few years starts to ease in the Emirates' private sector.

"We are expanding to the highest level," said Dr B R Shetty, the founder of UAE Exchange. The company aims to expand to 53 countries this year, from 29 countries at present, he said. "We want to be everywhere in the world," Dr Shetty added. "The sky's the limit."

Centurion Investment, an Abu Dhabi company, announced on Tuesday it would acquire a 40 per cent stake in UAE Exchange.

Reuters reported Centurion had paid US$2 billion (Dh7.34bn) for the stake, citing an unnamed source.

The deal makes Centurion the single largest shareholder in UAE Exchange, while the remaining 60 per cent of the exchange's shares are split between its current owners.

UAE Exchange's renewed expansion drive comes following a funding crisis in the private sector that has hobbled the ambitions of many companies during the past few years. Centurion Investment had previously invested $1.2bn for a 40 per cent stake in NMC Healthcare, which owns hospitals in the Emirates.

The proceeds of that deal were used as part of an expansion drive to provide 450 new hospital beds in Abu Dhabi and Dubai, but the deal also resolved a funding dilemma for the healthcare provider.

NMC had previously reported difficulty obtaining finance from its creditors, with banks withdrawing funding lines during the downturn.

Banks had a "duty" to support businesses during the crisis that they had not fulfilled, Dr Shetty said. "Now they're queueing up. However, I've restricted myself. I will pick carefully."

Following the onset of Dubai's financial crisis in 2009, banks in the UAE reined in lending levels, which had until then outstripped deposits.

Banks have been forced since then to set aside large sums of money as provisions to cover bad debts.

Bank lending increased by 4.1 per cent last year, with banks reporting Dh1.07 trillion in loans at the end of November, according to the latest data from the Central Bank.

Despite that, the days of easy access to credit businesses enjoyed before the global financial crisis are unlikely to return, bank analysts say.

"Banks were lending far more cheaply in 2007 and 2008 than they have ever done," said one analyst. "Several types of businesses will find that they'll never get back to their [earlier] levels of borrowing."

Central Bank data also shows lending again outstripping deposits since September, the result of a withdrawal of a total of Dh72.2bn from the UAE banking system that began in June.

Liquidity remains tight in the banking sector, and although lenders in Abu Dhabi — which shrugged off Dubai's financial turbulence — have increased lending levels, lending books have contracted for banks in Dubai.

Mashreq and Commercial Bank of Dubai both reported a decline in lending levels in their full-year results for last year.

Other Dubai companies have successfully tapped sukuk markets to secure the necessary capital for expansion. Majid Al Futtaim Holding said on Wednesday that it had successfully sold $400 million of sukuk to investors at a profit rate of 5.85 per cent.

The owner of Dubai's Mall of the Emirates attracted much interest from European and regional fund managers, with its issuance four times oversubscribed.

An initial public offering by UAE Exchange, first revealed in February last year, had been postponed but not forgotten, Dr Shetty added.

"We're ready," he said. "We've got all the corporate governance in place."

However, whether the company lists or not would ultimately depend on the decision of Centurion, he said.

twitter: Follow our breaking business news and retweet to your followers. Follow us