- Griffon Capital
Iran’s economy is set to get a once-in-a-generation boost when a deal to lift international sanctions gets finalized in a few months.
Xanyar Kamangar, who left his investment-banking job at Deutsche Bank to start Iran’s first private-equity firm able to take foreign investment, wants to be ready for when it happens.
His schedule is hectic. Here’s a typical weekly itinerary for Kamangar:
Monday – Tehran
Tuesday – Dubai
Wednesday – Doha
Thursday – Dubai
Friday – London
“Let’s just say it’s been really intense,” Kamangar said in an interview in London.
With an initial investment of $10 million (£6.5 million), Kamangar left his job last year in Deutsche Bank’s technology and telecoms team, where he had spent eight years putting together financing deals for clients such as Vodafone, and set up Griffon Capital.
The aim is for the firm to manage funds that act as a central channel of foreign investment into Iran, focusing on the boost to the country’s consumer and tech industries when the sanctions lift. Before then, foreigners are barred from investing.
Kamangar said the firm, which he founded with four others and which employs around 20 people, had “paid an arm and a leg” to lawyers to find a sanctions-compliant structure that could launch as soon as restrictions on cross-border finance deals into Iran get lifted.
With the nuclear deal signed earlier this year between Iran and the US, Kamangar expects this to happen sometime between December and March.
“You gain exposure to the market, before the market opens,” Kamangar said. “When that digital event happens, the lifting of the sanctions, you’re already there. And you get a benefit from the credit rerating that everyone expects to happen.”
And it could be a serious boost.
The International Monetary Fund has said Iran’s economy could hit a 5.5% growth rate next year. Here’s the key passage (emphasis ours) in a report on the Middle East published earlier this month:
Estimates of the growth impact, based on analysis of the Iranian economy, suggest that domestic economic activity could accelerate markedly following sanctions relief. Real GDP growth could rise up to 5.5% in 2016/17 and 2017/18, while hovering around 3.5% – 4% annually in the years after.
Here’s what that looks like:
What excites Kamangar isn’t so much the boost to oil exports when sanctions lift, but what that boost will do for consumer spending.
Kamangar, who holds dual Iranian and British nationality, said the Iranian middle-class was “unbelievably consumerist.”
“When the country opens up and the economy gets a kick, it’s them who will benefit disproportionately,” he said. “They’ll start spending, and when they do the companies that are exposed to these consumers are going to benefit the most.”
Iranian consumers are well educated and young, and they have debit cards and bank accounts they can use for online spending. Around 94% of Iranians have a debit card, compared with less than 20% in Egypt. While consumer tech companies have recently blossomed because of this, they have done so without access to international investors.
This makes them prime targets.
“The local tech players have had the opportunities in the last few years to grow in a petri dish without foreign competition,” Kamangar said. “They haven’t had any proper funding from day one and have yet grown – imagine what they would do when you give them a little bit of funding, you support them, they will explode and make a giant leap.”
He points to DigiKala, an internet shop like Amazon, which is valued at around $150 million (£100 million) but which he hopes will be worth a lot more as the market liberalizes and people’s spending habits change, which could mean an end to the practice of haggling.
“You go to a the bazaar and look at a phone and see it’s $1,500 (£1,000) say, but you look it up on DigiKala and it’s $600 (£400),” he said. “So you ask the guy, ‘Why is this phone cheaper on DigiKala?’ And in the end, they’re forced to match it. Everything’s transparent now. These guys are getting emails thanking them. It’s unbelievable how this has changed people’s pattern of buying.”
- Reuters/Raheb Homavandi
For now, Griffon Capital is waiting and limited to trading client money on the $100 billion (£65 billion) stock exchange or leaving it in a bank, which can reap as much as a 24% interest rate.
The firm’s clients are high-net-worth individuals and family wealth-management offices in Europe, but Kamangar is optimistic about attracting institutional money from big banks and asset managers when regulatory fears over investing in Iran die down.
Getting this wrong is expensive.
Only last week Credit Agricole had to pay a $787 million (£512 million) fine for breaching US sanctions aimed at Iran and Sudan in transactions processed from 2003 to 2008.
Kamangar said: “People say, ‘There’s no way I can understand the whole sanctions regime without a full team working on it, and then it’s not worth my while.'”
With geopolitical and financial concerns that can make or break their company, Kamangar and the other Griffon Capital founders haven’t had a day off in a year to get the firm up and running.
“The problem is Tehran’s weekend is a Friday,” Kamangar said, “which is a workday in Europe and then Saturday and Sunday, which are weekends elsewhere, is the beginning of the week in Tehran.”