Kenya’s TransCentury Group is looking for new investors to boost its finances after key shareholders have exited the company or reduced their stake in the wake of a questionable investment strategy that has pushed the infrastructure company into loss-making territory for the first time in close to two decades.
The firm is in discussions with both local and foreign investors in the hope of acquiring a new partner before the end of March 2016.
Group chief executive Dr Gachao Kiuna however told The EastAfrican that the company is looking for $100 million in additional funds in the next six months, but declined to reveal details of the transaction.
TransCentury has operations in Kenya, Uganda, Tanzania, Rwanda, Zambia, Mauritius, Democratic Republic of Congo (DRC) and South Africa.
Kenya’s TransCentury Group is looking for new investors to boost its finances after key shareholders have exited the company or reduced their stake in the wake of a questionable investment strategy that has pushed the infrastructure company into loss-making territory for the first time in close to two decades.
The EastAfrican has learnt that the company, whose market value plummeted from about Ksh13.35 billion ($128.54 million) to Ksh3.92 billion ($37.74 million) in four years, is in discussions with both local and foreign investors in the hope of acquiring a new partner before the end of March 2016.
The group’s more than 1,400 shareholders have lost 72 per cent of their wealth, with the company’s stock sliding from a high of Ksh50 ($0.48) per share in July 2011 to around Ksh14 ($0.13) per share last week.
Industry insiders said the company, which is listed on the Nairobi Securities Exchange, is in talks with new shareholders to inject additional cash into the business, with part of the money going to pay off debts.
“They will be seeking a private partner. They have been on the lookout and I think they will find one. This is an investment company and we have people out there who want to invest,” said a source.
“The group has some investments that have not gone well and they have debts to pay. They need cash and they need it immediately because they have a debt that is maturing in March next year,” said the source.
The investment company is faced with a $56.8 million debt procured by its Mauritius-based subsidiary — TC Mauritius Holdings Ltd — which is due in March 2016.
The debt is part of the five-year $75 million convertible bonds issued by TC Mauritius in 2011 to finance the group’s investment in Rift Valley Railways (RVR) — a consortium that won the 25-year concession to operate the Kenya-Uganda railway. The bonds were issued in denominations of $100,000 and they are maturing next year.
TransCentury had made a commitment to invest Ksh2.2 billion ($21.18 million) as part of the Ksh23 billion ($221.46 million) capital expenditure programme to revive RVR.
Group chief executive Dr Gachao Kiuna however told The EastAfrican that the company is looking for $100 million in additional funds in the next six months, but declined to reveal details of the transaction.
“The exact nature of the transaction will be decided by the company board based on the recommendation from the advisors and will be duly communicated,” said Dr Kiuna.
TransCentury acquired a 34 per cent shareholding in RVR in 2006 but after eight years of failure to meet return targets set by the group, its stakes was sold off to Egypt’s Citadel Capital in March 2014 at a loss of Ksh1 billion ($9.62 million).
This pushed TransCentury into a loss of Ksh2.3 billion ($22.14 million) last year followed by another loss of Ksh676.13 million ($6.51 million) during the six months to June, with implementation of a number of projects in its engineering division failing to take off.
The amount raised from the sale of the RVR stake — Ksh3.8 billion ($36.59 million) — was invested in the existing power and engineering units and to pay off debts.
Consequently, key shareholders exited the company after its listing by way of introduction on the NSE in July 2011.
They include Jimnah Mbaru, the chairman of Dyer&Blair Investment Bank who owned a 6.24 per cent stake, and Edward Njoroge, the current chairman of the Nairobi Securities Exchange with a 5.78 per cent shareholding, according to the company’s annual report of 2014.
Others were Joseph Mbui Magari (4.16 per cent), Job Njeru Kirira (4.16 per cent), Peter Gachoni Mbogua (3.37 per cent) and Ndung’u Gathinji.
Investors who reduced their shareholding in the company included Zephaniah Gitau Mbugua (chairman, TransCentury), Michael Gitau Waweru, (former commissioner general at the Kenya Revenue Authority), Peter Tiras Kanyago, Ephraim Kareithi Njogu, and Stephen Njoroge Waruhiu.
Dr Kiuna, however denied that the company’s investments were underperforming, saying investments in infrastructure projects are expected to yield returns in the long-term.
“Infrastructure projects that include power and transport infrastructure have excellent long term returns that allow for scaling up of the business,” he said.
“In addition, all economies in the region are at a point where there is critical need to invest in infrastructure development to move to the next level,” he added.
TransCentury has operations in Kenya, Uganda, Tanzania, Rwanda, Zambia, Mauritius, Democratic Republic of Congo (DRC) and South Africa.
The company mainly deals with infrastructure projects in the power, transport and engineering sectors.
The power projects include the manufacture of cables, transformers and switchgear.
Engineering projects include distribution of industrial machinery, spare parts and consumables, supply and installation of weighbridges as well as provision of mechanical, civil and electrical engineering services.
The group is also involved in the packaging and blending of black tea and herbal infusions through its Chai Bora subsidiary.
Its investment in the cable business has not been smooth sailing either.
The company owns stakes in East African Cables Kenya, Tanelec (Tanzania), Cableries du Congo (DRC) and Kewberg Cables &Braids (South Africa).
However, East African Cables Ltd, which is owned 68.3 per cent by TransCentury, recorded a loss of Ksh70.93 million ($682,991) during the six months to June compared with a profit of Ksh231.82 million ($2.23 million) in the same period last year.
This translated into a net loss per share of Ksh0.11 ($0.001) compared with earnings per share of Ksh0.82 ($0.007) in the same period last year.
“Higher interest rate and currency depreciation have led to exchange rate losses and higher debt costs,” said Mr Gachao.
East African Cables’ working capital declined by 76 per cent to Ksh295.45 million ($2.84 million) from Ksh1.22 billion ($11.74 million), making it difficult to meet its short term obligations.
Analysts warned that competition in the cable industry is expected to intensify with the planned entry of the Sri Lankan cable manufacturer Sierra Cables Plc into the Kenyan market.
