Mukesh Valabhji Q&A

Mukesh Valabhji

Mukesh Valabhji is a fourth-generation Seychellois entrepreneur and investor. As founder of Capital Management Group and the Seychelles Marketing Board, Mr Valabhji has explored a vast array of business interests including telecommunications and media, commercial real estate, hospitality and tourism. He has also acted as Economic Advisor to the Seychelles President and spent a ten year period as Chairman of the Public Utilities Corporation and serves on the Boards of both Softbank PrinceVille Investments and Crimson Investment. We asked Mukesh Valabhji a series of questions relating to his vast business experience – here’s what he had to say:

 

  • Church Street Holdings, comprised of the Buxani Group and a collection of offshore investors advised by your own Capital Management Group, has invested heavily in commercial properties within the central business district of Singapore, purchasing premium office strata in properties including Samsung Hub, Robinson Road and the Finexis Building and selling these on at a profit when the market is favourable. What makes Singapore such an attractive option for commercial real estate investment?

Singapore is probably one of the easiest countries for a foreign investor to do business in. It’s the ease with which you can operate that makes it such a good choice for anyone considering investing in commercial real estate.
As a foreign investor, you are really made to feel welcome and treated no differently than a local investor. The banks in Singapore are also very efficient and they work closely with clients to find solutions if issues do arise. This, coupled with a low tax base and very effective government who are welcoming of international investment, means that the climate is right for real growth.

 

  • The sale of the 21st floor of the Samsung Hub building in 2014 attracted a record price for an entire floor ($3,280psf) after a number of unsolicited offers came in from potential buyers. The previous year Church Street Holdings divested the 17th floor in six individual strata units, with one such unit selling at $3,500psf. Why did the Capital Management Group / Buxani partnership make the decision to divide some floors and not others in order to achieve the maximum prices?

We realised that there was a greater demand for smaller owner occupied space. By making the decision to divide these floors, the sale of these units helped us to subsequently sell complete floors.

 

  • Does Church Street Holdings have plans for any new investments in commercial real estate in Singapore now so many have been successfully sold?

Because of the success that we’ve had with our previous investments we are keen to look for new opportunities in Singapore. Currently we’re looking to focus on establishing Grade A office space.

 

  • There are rumours that you will be venturing next into the US property market as high competition and low rates of lending see commercial real estate prices surpass the 2007 peak in the completion of a seven-year turnaround. How attractive is the US for Capital Management Group in terms of future real estate investment?

We have previously explored various markets, including the USA, however we feel that our current focus should be on developing in markets where we have strong local partners and investors. While the USA isn’t currently on our radar screen, we continue to keep an eye out for new opportunities. Dubai, Europe, and of course, the Seychelles are all interesting prospects for future projects.

 

  • The new Six Senses Zil Pasyon luxury resort and spa is scheduled to open for business on the private island of Félicité in the Seychelles later this year. How will this visionary project create truly memorable and unique experiences for guests?

Zil Pasyon, managed by Six Senses, will be one of the most iconic and sought after Resorts and Residences in the Seychelles. The picturesque landscape coupled with exclusive facilities will redefine luxury and privacy. We are all very excited for the grand opening next year!

 

  • How do you believe the opening of the Six Senses resort will affect tourism across the Seychelles?

The Seychelles offers a variety of attractions which visitors of Six Senses will be able to take advantage of. As a beautiful location for weddings and other celebrations, it will draw larger parties of visitors who will want to see everything that the Seychelles has to offer.
I believe the resort will set new standards in eco-tourism, offering a level of luxury and privacy which will attract travellers to the Seychelles who are looking for high quality accommodation.

 

  • Which other hospitality investments and resorts does Capital Management Group have an interest in, both within the Seychelles and across the globe?

We are currently developing a new integrated resort on the main island Mahe. It will include a Five Star hotel, Casino, Designer Residences, High end shopping and a marina. As many of these attractions are lacking in the Seychelles, it will be a considerable development.

 

  • Intelvision has been providing affordable telephone, broadband internet and cable television services to the Seychelles for over a decade. How do you believe the Intelvision philosophy of providing internet services that are accessible and affordable to all has affected the lives of the poorer families in the region?

We have certainly changed the entertainment scene in Seychelles, both in terms of providing affordable access to television and also the internet. Our aim to be the cheapest provider, with more channels then any of our competitors, has enabled us to compete head on with giants like Cable & Wireless. We are still way ahead of them in terms of content, price and efficiency.

The effect that this had in making services available to poorer families in the region is reflected in our large customer base; we have almost 90% of the market share in Cable TV and 40% in internet. We are in 80 % of the homes in the Seychelles through Fibre-optic or HFC.

 

  • What are the main objectives of Intelvision looking into the future?

Our next step of expansion is in the mobile industry, launching a mobile service through a 4G platform.

 

  • How does Intelvision combine profitability with the provision of affordable services that are accessible to all Seychelles households?

We achieve this by ensuring that our overheads are kept low. By making sure that we have no exorbitant head office expenses, we are able to keep an advantage over our competitors and pass on those savings to our customers.

 

  • What expectations do you have for the new 3G and 4G network roll-out through Intelvision?

We will be lower in price than the other networks, also launching access to TV via mobiles using a state of the art network.

 

  • You serve on the board of Softbank PrinceVille Investments, which has recently closed a $250 million fund for new technology start-ups and expansions within the Asian region. How do you believe this fund will be different than others?

The advisory board is made up of highly respected industry professionals, which is something that sets us apart from the rest.

We also have a solid team at Softbank, they source various deals in the technology space. Sound investments in companies, such as Fitbit, are also important.

 

  • Why do you believe more and more tech companies are seeking global expansion into the Asian market ahead of Europe?

Asia has developed a world renowned reputation as being industry leaders; it is the new normal in technology, not only in terms of markets and finance but also talent. There is a continually growing talent pool which is why many tech companies are looking to Asia for expansion.

 

  • What led to your appointment as Economic Advisor to the Seychelles President in 2000?

It was a number of factors, but I believe the key one was my strong track record on managing companies and possessing the ability to turn around those making a loss.

 

  • The Valabhji family have been involved in a variety of trading businesses within the Seychelles for more than 75 years to date. Which family enterprises particularly inspired your own interest in trading?

I think it was not what the family had been doing over the 75 years, but what it was not doing.

It has always been a local Seychelles focused company and all investments and assets were based in the Seychelles. I was interested in taking it internationally.

This drive for expansion is why most of my activities are now overseas. The relative size of the Seychelles economy is small; if you want to grow you need to diversify and go into new markets.

Mukesh Valabhji Explores Private Equity Investment Strategies

Mukesh Valabhji

Private equity refers to the process of raising funds for a business through institutional investors rather than through the stock market. These could be high net worth individual investors, pension funds, endowments or insurance companies. Private equity investment is usually used to help companies at the start-up stage or those more mature companies who are ready for expansion to grow and develop. The Seychellois entrepreneur Mukesh Valabhji has a wealth of experience across all the various types of private equity investment. Among his many business interests, Mukesh serves on the board of Crimson Investments, a global private equity firm which focuses on investment in companies with an EBITDA of between $5 million and $40 million looking to expand within the global market and achieve their full potential. Mukesh Valabhji images will soon be available, representing his many business interests in hospitality, trading, media and telecommunications and much more. Here Mukesh looks at the most common private equity investment strategies.

Mukesh Valabhji

Venture Capital (VC)

Venture capital investment refers to those investments which take place at the beginning of a new company, typically within the first three years, in order to fund the start-up and early stages of business development. In the US venture capital is considered a separate entity to private equity but in Europe, although venture capital is a very specific component, it is nonetheless categorised within the bounds of private equity. Venture capital funds offer cash-hungry new businesses with little to no track record of profitability but the potential to achieve more the opportunity to ensure that all relevant resources are in place in order to succeed.

Leveraged Buyouts (LBO)

A leveraged buyout is where a private equity fund acquires a company of a sector of a company in a transaction funded mostly by financial leverage or debt. Generally companies which attract this type of private equity are those which are already mature and generate operating cash flows. In a leveraged buyout, a financial sponsor agrees to acquire all or part of a company but without committing all the required capital. The cash flows of the business are then used to make interest and principal payments on the acquisition debt. The amount of debt used varies greatly from business to business and will depend on aspects such as willingness of lenders, interest costs of the debt and the demonstrated ability of the business in question to fund those costs, state of the market and financial history and condition of the acquired company. Typically, the leverage will range between 60% and 90% of the total purchase price.

Growth Capital

Growth capital refers to investments which are typically made in mature companies seeking the financial backing for expansion or restructuring without creating a significant change in management. These funds may be used to acquire a competitor or part of a supply chain, to expand into new global markets, to fund a site roll-out, for product development and marketing or for the purchase of significant new capital assets. Companies seeking growth capital do so at a time when they are planning a significant transformational event. While venture capital funds the initial stages of starting a company, growth capital is aimed more at mature companies with a proven track record of profitability requiring the capital to drive growth. The growth capital investors will typically claim an ownership interest and in some cases a contractual return such as interest payments.

Distressed Investments

Hedge funds and other investors who are prepared to take on a large risk for a potentially huge return may consider distressed investments. This is where the investor places their money with a company which has filed for or is likely to file for bankruptcy in the near future due to large amounts of debt. The risks are high, yet should the investment provide the boost the company needs to pull back from the brink the returns have the potential to be massive. Distressed debt can be sold for a very low par value percentage. If the company then recovers, the once-distressed debt can then be sold on at a considerably higher price than it was bought for. As the risks are so high, this form of investment is only really suitable for experienced large investors or groups of investors such as hedge funds.

Mezzanine Capital

Mezzanine capital financing can be defined as debt capital which gives the lender the right to convert to equity interest or full or partial ownership under the circumstance that the loan cannot be fully repaid according to the terms and conditions set out. It is typically used to fund rapid expansion in a mature company which has a proven history of profitability, a good track record in terms of reputation and product standard and a viable plan for expansion. Mezzanine lenders will usually provide capital relatively quickly without recourse to due diligence and without a requirement for collateral from the borrower, which means the loan attracts extremely high interest rates in the range of 20% to 30% of the loan amount. On a company balance sheet, mezzanine financing is counted as equity, which can often make it easier to obtain other forms of finance or credit.