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KARACHI: Turmoil mounted at Dubai-based private equity firm Abraaj Capital as the company announced plans to lay off 15 per cent of its global workforce in the ongoing fallout from a damaging dispute with some of its powerful investors, Bloomberg reported on Thursday.

The company owns controlling share along with management control in K-Electric, Pakistan’s largest integrated power utility, as well as an oil refinery and has plans for a large investment in the healthcare sector.

“It is always difficult to separate talented people from the firm,” the Dubai-based buyout firm said in a statement quoted by Bloomberg. “The personnel changes we are making as part of this re-organisation will help ensure that Abraaj is better positioned for operational effectiveness and sustainable growth.” The firm employs more than 350 people worldwide.

Decision comes as troubles escalate at region’s largest private equity fund

Abraaj manages more than $13.6 billion through various investment funds and has been at the centre of a growing storm of controversy since Feb 2 when The New York Times first reported that four investors in its latest billion-dollar healthcare fund claimed their money had been misused. The investors include the Bill and Melinda Gates Foundation and the World Bank, amongst others. Specifically, the report said the investors wanted to know why $200 million invested by them in the healthcare fund had not been utilised.

The New York Times report, citing details from the meeting, said Arif Naqvi, the founder of Abraaj, told the investors that the fund had met with delays due to regulatory hurdles and government approvals. Evidently the investors were not convinced, so Abraaj ordered an internal audit by KPMG, which cleared the firm of any wrongdoing. But the investors appointed an independent auditor of their own, Ankura Consulting.

At issue is whether the company moved any funds out of the specialised Abraaj Growth Markets Health Fund where the investors had placed them for deployment in a host of healthcare assets for low income groups that the company is developing in four countries: India, Pakistan, Nigeria and Kenya.

The Ankura report is not out yet, but three days ago the Financial Times reported that it “is expected to report that Abraaj moved investor money into its own account, where it was used for ‘general corporate purposes’”. That report cited “people briefed on the process”.

Since word of its troubles hit the news, Abraaj has separated Arif Naqvi from the company’s main investing business and initiated a large-scale internal reorganisation. It has also seen a string of high-profile departures of senior executives and partners, frozen its activities in other funds, been hit by a round of redemptions from other investors, and held discussions for a sale of stakes in its main investing business. Thursday’s announcement of cuts to its workforce escalated the turmoil engulfing the company.

Published in Dawn, March 30th, 2018

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