Things couldn't be any better for Khalid Bin Kalban, the CEO of Dubai Investments (DI). His firm, the largest investment company listed on the Dubai Financial Market, recorded revenues of AED2.6bn and saw its net income climb 58 percent last year to AED 320m from 2011 on the back of a recovery in the real estate sector and markets rebounding.
“Last year was a year of consolidation for all the companies," Kalban says in an interview with Arabian Business. “This year, 2013, and onward is going to be a growth strategy going forward."
To finance that growth, Dubai Investments plans to issue a AED1bn ($272m) Islamic bond, or sukuk. The bond offering will pay off debt and finance the expansion of more than 30 subsidiaries of DI in real estate, manufacturing and finance.
“Part of what we are borrowing now will pay partly some of the loans against some of the manufacturing units which were subjected to penalties and higher costs of borrowing," says Kalban. “Once we get that AED1bn we will restructure, maybe we will increase some of the capital of those companies, reduce their costs and their profitability will be higher."
The company wants to go to the market to take advantage of the low cost of financing by issuing the five-year sukuk at less than 5 percent. Kalban expects to close the deal and secure the financing by the end of April.
The company is also currently reviewing six entities as part of its acquisition and growth strategy which would cost it about AED280m.
“There is a positive trend in equity markets, in real estate and in manufacturing," Kalban says as he speaks about the potential for growth and expansion of his company's units. “The focus of our manufacturing is building materials and we see the construction activity happening around us in the GCC at a good scale. So our companies in glass and aluminium have secured good orders. The order book is full."
Saudi Arabia, the largest economy in the Arab world and biggest producer of oil globally, is spending more than $500bn to expand its infrastructure. An expected budget surplus in 2013 and the government drawing down its foreign assets, which stood at around $634.8bn at the end of November 2012, will help finance its expenditure plans in the event of any shortfall in revenues, Jadwa Investment said in a report last month. Construction is forecast to be the fastest growing sector in 2013, according to Jadwa. Qatar and the UAE are also spending billions of dollars on backbone and foundation projects.
Two thirds of companies in construction await new projects in local and regional markets or expect to restart stalled projects, the Department of Economic Development of Dubai's government said in a report earlier this month. “The rebound in construction-related activity is also reflected in manufacturing as cement and glass manufacturers are more optimistic," it said in a statement.
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