TANZANIA – Retail giant Nakumatt has insisted it is in Tanzanian for the long haul despite the planned sale of a majority stake of its business.
The retailer confirmed on Friday reports that it is seeking approval to sell a 51 per cent stake in its Tanzanian unit to Ascent Investment Ltd as it follows through the plan to retire its debt load.
Nakumatt Holdings regional strategy and operations director Thiagarajan Ramamurthy, however, played down the divestment, insisting it is within the retailer’s strategic plan to grow its market share in the country.
“Tanzania is a good market and the business will grow. As a long term player, we will become and remain as the leader. Strategic locations and supply chain need to be focused on,” Mr Ramamurthy told the Business Daily in an interview while opting to be tight-lipped on the value of the stake.
He said the expected entry of a Tanzanian shareholder will support Nakumatt to gain a toehold in the market by removing bottlenecks.
“Local shareholding will assist in real estate development and supply chain. (The buyer) is a Tanzanian firm.
Strategic locations, affordable rentals and importation need assistance. The local partners will be able to support that,” said Mr Ramamurthy.
Nakumatt, which is Kenya’s largest retailer with 61 stores across East Africa, has already written to Tanzania’s Fair Competition Commission (FCC) seeking a nod to the intended sale.
The watchdog is said to be reviewing the transaction. Nakumatt expanded its presence in Tanzania two years ago after acquiring three stores belonging to South Africa’s Shoprite in a deal valued at Sh4 billion.
The acquisition gave the retailer a bigger presence in Tanzania where it debuted in December 2011 with the Nakumatt Moshi outlet.
Nakumatt Holdings recently revealed plans to offload a 25 per cent stake in its business amid a mounting debt load.
The steep increase in its gross debt in Kenya and in Uganda, it said, had piled pressure on operations and led to long payment delays to suppliers.
“Barring any eventualities, this deal will be closed in a few weeks with full disclosure once done,” Neel Shah, the business development director at Nakumatt Holdings told the Business Daily in an interview.
“This equity fund will help retire existing funding tools, including bank loans and related debts.”
Nakumatt’s gross debt more than tripled to Sh15 billion in February 2015 from Sh4.2 billion in 2011.
Analysts on Friday pondered over the retailer’s debt levels and its plan to raise additional capital to offset it.
“I still find it mind-boggling that Nakumatt has managed to rev up its debts to this degree given that the model is one where goods are provided to Nakumatt on credit with very long settlement times and that Nakumatt only leases its sites which are often times given at sweetheart rates in order to get them in as an anchor tenant.
“I am not certain it will prove easy for Nakumatt to find a minority investor. And down-shifting their Tanzania position is probably recognition of that fact,” said chief executive of Rich Management Aly Khan Satchu.
Nakumatt Holdings has since issued a statement in which it admitted that it was in the red and was seeking a rescue.