INTERVIEW: Odua Investment Company Limited open to investors willing to share ownership

Recently, Odua Investment Company Limited celebrated its 45th anniversary.

12/3/2021 9:33:00 PM

INTERVIEW: Odua Investment Company Limited open to investors willing to share ownership

Recently, Odua Investment Company Limited celebrated its 45th anniversary.

December 3, 20216 min readAdewale Raji is the 8th Group Managing Director/CEO of Odu’a Investment Company Limited. He was first appointed into the position for a term of five years on June 1, 2014, and later got his appointment renewed for a second tenure in June 2019 following performance evaluation by Top Tier (Big-4) Advisory Services and ratification by shareholders.

He is an entrepreneurial and strategy-driven leader/chief executive, with over three decades of leading industry expertise. He is an accomplished professional with multinational experience in FMCG end-to-end Supply Chain, with proficiency in Materials Management, Planning, Procurement, Logistics & Distribution and Route-to-Market Channel Development & Deployment.

Mr Raji has a track record of exceeding set targets, growing bottom line while spearheading operational improvements to drive business profitability and costs optimisation. He is highly successful in implementing business process improvements, change management, developing people and commercialising all aspects of a business, excelled in dynamic & demanding environments while remaining pragmatic and focused on value, people and results.

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Recently, Odua Investment Company Limited celebrated her 45th anniversary, and he gave us an insight into the organization and how it aims to continually be the economic powerhouse of the South-Western region of Nigeria.Excerpts-Odua Investment Company Limited

(OICL), earlier in the year during the annual general meeting, the conglomerate revealed that it had won the Bita Oil and Gas marginal field. Have you paid your signature bonus for the field and also, have you secured enough investment to develop the field so far?

AR:The Bita marginal field was awarded to us and another partner by the Department of Petroleum Resources. We have 48.76 per cent and the other partner has 51.24 per cent. The entire bid amounts have been paid relating to us and we have also paid the signature bonus. The asset as it stands now; we and our partner have jointly incorporated a new Special Purpose Vehicle, called Bita Exploration and Production Limited. It is this field we are now using to discuss with Chevron which through what is called a farm-in agreement, will hand over that asset to us. There are indications at this point that we may not need much investment, just about $20 million to go for the first oil. But the estimate that we have is that the total investment might require between $120 million and $150 million. Our strategy, having paid up the signature bonus is that we will sit down and listen to people who offer financial and technical participation on the basis that they can also take equity in the whole project.

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So that is our strategy, where those who have the technical capability and the financial muscle will come in and will negotiate. They take equity, bring in the funds and the technical know-how to be able to produce oil from the field. Much of the funding is going to come from equity participation. As it is now, we and our partners are joint 100 per cent owners.

Q: The company has revealed the numerous sectors it is expanding its investment activities into. There is insurance, oil and gas, real estate, hospitality, there are talks of fintech among others. These businesses are technical businesses that also take time to yield returns up to the capital invested. A key strategy listed is through joint ventures. Are you not spreading yourselves too thin and will you have enough oversight to be able to determine the results generated in these businesses?

AR:Calling us a conglomerate is because we are playing in multiple sectors but from the strategy we have unveiled, Sweat Revive Create (SRC 2025), you will see that we have tried to limit ourselves to eight sectors, and you will see that we are already playing in some of them. Some are new like e-commerce, logistics etc. They are new in the sense that we know they are relevant for the present and the future, and we must look for means to participate in them, other than the sectors that we have traditionally been. Agriculture is one sector that we have been in, but we need to go deeper. We should not just be quoting the money we made from agriculture, we should also be quoting the jobs that we have created, the raw materials we are providing for industries, and we should be talking about the internally generated revenue that comes from that business.

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The whole idea about using strategic partnerships is that it allows you to have a larger footprint and also means that for us, we are gaining specific expertise in those areas. In other areas, we talk about “revive.” Until the Nigerian Wire and Cable Limited in Ibadan went down, at the beginning we were 60 per cent shareholders, but it failed because of governance issues and others. The truth today is that there is still a very high demand for cables in Nigeria today. So under the revive strategy, if we get the right partner with technical capability, we will want to enter into cable again. But we must enter on the basis that we have a partner that is already attested nationally or globally to be a leader in that sector, and that is what will lead to leverage because we know the market is there. We know our shortcomings in terms of being operators of the business, because of that we have to make sure that in entering a partnership, we have taken care of the technical management and the financing. We will build capability in terms of the investment framework and the investment guidelines. That is the reason why we decided in the group head-office to move into a lean non-operating business. Our main expertise will be in the core areas of investment.

Our capability will not be built in operations but in relationship management, alliance formation, partnership creation, and joint ventures setup. We will make sure we have top-notch people who can do project appraisals, and make sure that requirements in terms of return on investment, internal run rate, return on assets are all top-notch and you are doing benchmark comparison in the industry. Because your benchmarks are what make the business. In addition, we need to also make sure we can galvanise the funds as this business requires long-term, medium-term patient capital. We should be able to use our balance sheet which is over N150 billion to leverage money to do investments. As an expert once told us, why don’t you own one per cent of MTN? One per cent of N3 trillion is N30 billion, so if you have that, you can own one per cent of MTN. If you generate long-term patient capital, then you are capable of taking advantage of those opportunities. And frankly, the companies that thrive in Odu’a were found on this basis like in Lafarge, and what we had in Guinness before we sold off. It was such that our forbearers not only used Ikeja Industrial Estate as land that they gave Guinness to operate, they also added money to take equity. I have seen a record of 40 million units of Guinness shares, and today we have zero. Those are the things that we need to build afresh.

Q: The Sweat, Revive and Create 2025 plan of the board says the board anticipates that the business will expand revenue by more than 500 per cent in five years. That’s a compound annual growth rate of about 45 per cent annually. That’s quite ambitious for joint venture projects. How do you want to achieve that with this wide portfolio? Are you going to be taking on leverage, and what are the risk management mechanisms if you are going to be growing that fast?

AR:There are very tough risk mechanism methods and risk appraisals that have been put in place and it continues to evolve. Quite clearly, we want to be sure it is not just making money, but it’s money that is actually impacting the people. Governance is very strong as there are two independent non-executive directors on the board, who are not nominees of any shareholder, and we are allowing them to play their roles. Besides, accomplished professionals are the ones that our shareholders also nominated. All these have been put in place and we are stretching ourselves by making sure that the different entities we have chosen as consultants are top-notch global firms. Recently, we appointed PwC Nigeria as our external auditor, KPMG Nigeria is handling our strategy and tax. We have also Deloitte handling the governance side like whistleblowing, conflict of interest. So we are holding ourselves to the highest standards of building things and the reason is not far-fetched, it is just the beginning. We have to achieve it which is tough, and we also have to sustain it which is even tougher. But we have to lay the foundation of both at the same time and make sure that it is completely irreversible and make sure that with governance, it has to be stronger.

Q: Is there a plan to raise funding in the capital market in the future, and is the board eyeing a potential listing on the Nigerian Exchange Limited, or will it be staying private for quite some time?AR:Remember we are a group and if we are owned by the six state governments of the southwest, the likelihood that an investor will be comfortable to be a shareholder will be slim. He will believe it is an unequal investment. So the company we call Odu’a Investment is not likely going to share ownership, but the entities within the company like the Lagos Airport Hotel that will be 80 years by next year will in the future, be a global destination for conferencing, banqueting, entertainment and leisure. How is that going to happen without the money and the expertise? So you find out that the hotel for us today and in our hospitality business as a whole, what we are looking forward to is a situation where it is this area we will allow investors come share ownership with us. It is at a prime location. Potentially, if you have a proper partner, you can actually spring on half the size of this land up to a 250 to 300-bedroom single-block global hospitality destination.

In addition, you still have half of the land still available for other development. That is the approach we intend to use. So in the future, a Lagos Airport Hotel is not there, maybe it will become a Marriot Airport Hotel, a Sheraton Airport Hotel, but in the process, with the partner bringing his funds, and we will make this asset available for development, then the benefit you then have is that at that point we do not mind if we are a 20 per cent or 30 per cent shareholder, but the investor has the opportunity to come in and have a majority stake. So what we see in the future is that we have a Sheraton, 4 Seasons Airport hotel, that is now owned by that partner and OICL where we have diluted ownership. When it moves from a N2 billion/annum revenue hotel to a N10 billion revenue hotel. In that, if you are 25 per cent, you will have N2.5 billion accrue to you compared to when you are 100 per cent of a N2 billion business. So that is the vision that we have and that is how we plan to sell stakes in our businesses.

Q: So those are the structures you are putting in place to make sure that if something like COVID-19 happens again, it won’t really have that much of an impact?AR:

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