In an exclusive interview with the Financial Tribune, CEO of Iran Fara Bourse Amir Hamouni said companies willing to transfer ownership or be merged with other companies but are not listed at IFB’s primary and secondary markets can be advertised via IFB’s third market through their majority shareholders. “IFB hosts many M&A cases in collaboration with the Iranian Privatization Organization – affiliated to the Ministry of Economic Affairs and Finance – with many companies being offered directly by IPO,” he said. Many foreign investors strive to take hold of government-owned companies in the M&A market, waiting for them to be listed at the market, according to Hamouni. “These companies will be evaluated by the respective authorities and put up for auction via IFB board in a transparent procedure.” More than 319 M&A cases worth $13.3 billion have so far been advertised via IFB, said Hamouni, adding that “111 cases valued at $4.5 billion have been transferred to potential customers, including Iranian expatriates.” The total value of M&A cases offered at IFB’s third market since its launch six years ago, including cases offered via IPO, stands at about $40 billion, said Hamouni. “M&A cases worth about $200 million were offered at IFB during the last Iranian year (ended March 20) alone,” he added.
Preparing for Post-Sanctions Era
According to Hamouni, IFB’s departments are already preparing to set up the infrastructures needed to attract foreign investors after a possible removal of economic sanctions against Iran when a comprehensive agreement is reached with the major world powers over its nuclear energy program. “Since foreign exchange rates can significantly impact portfolio returns, investors should consider hedging the risks through appropriate measures, specifically when conducing trade in local currency (rial),” he said. He emphasized that it is the stock market’s responsibility to prepare hedging instruments such as currency futures and forwards.
Foreign Investment
Referring to various types of foreign investments in Iran following the removal of sanctions, Hamouni stated that foreign direct investments could be made either in the form of greenfield investments or channeled into Iran’s equity market, while the latter option offers a higher level of transparency. Greenfiled investment is a form of foreign direct investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up. Hamouni noted that while the companies at IFB are not among the greenfields, they are categorized as brownfields, in which a company or government entity can purchase or lease the production facilities to launch a new production activity. He added that many high-yielding brownfiled companies in Iran’s equity market, including automotive manufacturers, are waiting to absorb funds that would help them adopt state-of-the-art technologies, slash their costs and increase productivity.
“Many companies listed at IFB’s base market are still at the planning stage,” said Hamouni, noting that these plans have been carefully studied with assistance from foreign experts to identify the most suitable place to set up various industries, such as petrochemical facilities. He also referred to mineral and oil related companies in the equity market which are not working at their full capacities or are categorized as semi-finished projects, noting that these plants could also entice international fund managers. Hamouni mentioned Middle East Mines Industries Development Holding Company–a large conglomerate of five steel plants worth nearly $2.43 billion–and Asia Zarin Madan Company as two of IFB’s largest listed conglomerates that many foreign companies are interested to establish joint ventures with. “Foreign direct investments can be made in brownfield projects in IFB’s first, second and third markets,” he said.
According to Hamouni, foreign investors have many options to enter Iran’s untapped market through transfer of cash or technology to companies that would help reduce production costs or maximize profits. “IFB, in collaboration with the Organization for Economic Investment and Technical Assistant, is preparing documents to introduce investment opportunities in Iran, including new projects and development plans,” he said.