Ithmar Capital, a GCC-focussed private equity specialist, will launch its Fund III with a portfolio size of $1 billion (Dh3.67bn) by the fourth quarter of this year, a top executive at the firm said. The fund, when launched, will double the size of its Fund II, which the group aims to close between the second and third quarters.
Last week Ithmar closed the third deal from its Fund II portfolio with an undisclosed investment in Dewan Architects and Engineers, a UAE-based construction and consulting firm.
“We are targeting to close another three or four deals in the first three quarters of this year, which will exhaust the entire investment size of Fund II,” said Faisal Belhoul, Founder and Managing Partner of Ithmar Capital.
Belhoul said the firm is targeting a net internal rate of return, or IRR – the rate at which a certain amount of capital today would have to be invested in order to grow to a specific value at a time in the future – of 25 per cent for its investors. “But the current dynamics of the market should allow investors to exceed that target. An IRR of 30 to 50 per cent is a realistic target,” Belhoul said.
Post-investment, Ithmar expects Dewan to achieve a compounded annual growth rate (CAGR) – the year-over-year growth rate applied to an investment or a company’s activities over a multiple-year period – of 40 to 50 per cent. “We expect two to three times multiple of our investment over a three year period.”
Following the investment, Ithmar will be part of Dewan’s board, but will not exercise management control in the company, Belhoul said. “The partnership in Dewan has happened because we recognise the company to be well managed.”
Belhoul said the Dewan deal was part of the investment firm’s growth capital strategy, wherein the firm buys a significant minority stake in a company through its investments.
In September last year, Ithmar successfully completed the acquisition of the entire new share issue of Kuwait’s Mushrif Trading and Contracting Company (MTCC), at a cost of approximately $97 million (Dh356m).