Foundation Holdings looks to double assets under management to Dh1bn in 2020

The DIFC-based investment firm has a pipeline of deals worth about Dh650m, says chief executive

Abhishek Sharma, chief executive Foundation Holdings says the company has a strong pipeline of deals. Reem Mohammed / The National

Foundation Holdings, an investment firm focused on the healthcare and education sectors, is looking to double its assets under management to Dh1 billion this year as it continues to build its portfolio of investments in the GCC and India.

"We are going to swing to Dh1bn in assets under management as an investment company," Abhishek Sharma, chief executive of the firm told The National. "This is the goal we have set ourselves this year."

The Dubai-based investment company, which counts Air Arabia’s chief executive Adel Ali among its shareholders, has up to $150 million (Dh550m) in funding to deploy on new investments. The company, which has been conserving cash for more than a year, has the backing of the board and key shareholders to actively look for deals, given an increase in opportunities and a drop in asset valuations in the wake of a coronavirus-driven economic slowdown.

“The commitment [for funds] we always have from our shareholders is anywhere between $100m to $150m and that’s the cheque we can comfortably drawdown and work with,” Mr Sharma said.

The direction from the board is to “go with a bucket [of cash] in hand and not a little cup” as this is the time to invest and make money, he added.

The company has a current deal pipeline worth about Dh650m and Mr Sharma expects to close a few transactions this year. These potential deals are split between education technology and pre-kindergarten markets as well as bolt-on acquisitions by portfolio companies, he said.

“The filter has never been bigger in three and-a-half years. There is a huge amount of opportunities that we are seeing right now,” he said.

The coronavirus crisis has brought investors’ focus sharply back on the fundamentals and business models of target companies, he said. Valuations are still important but are not the only consideration in deals right now.

“We are sharpening our pencils very carefully,” he said. “We are looking for companies that have bulletproof business model[s].”

Foundation Holdings' most recent deal is a joint venture with MindChamps PreSchool, a publicly-listed early learning institution with centres in Australia and Singapore. The JV fund aims to raise an initial tranche of between $50m and $100m to acquire and establish preschools across the GCC. The company last year also formed a JV with India’s Ryan Group, which runs about 150 schools in Asia’s third-largest economy. Ryan EduNation, as the venture is known, will invest $100m in kindergarten to 12th grade schools across the country.

Foundation Holdings is currently working on a partnership deal with a company from South-East Asia, which specialises in education technology, bringing “bricks and clicks” together. “This could be a game changer for Foundation [Holdings],” Mr Sharma said. “It will shake up the region in a positive way, given the scale and impact of the platform,” he said, without giving further details. The transaction is especially timely given that billion of pupils across world have been forced to adapt to distance learning in the wake of the pandemic.

The K-12 private education market in the GCC over the past few years has attracted a lot of the investor attention. This segment is expected to double over a five-year period to $26bn by 2023. In Saudi Arabia the K-12 private education market is poised to rise to $12bn in 2023 from just $5bn in 2017, according to a 2018 Boston Consulting Group report.

Foundation Holdings, which has invested about $150 million over the last three years through seven investment deals, is bullish on the outlook of both the healthcare and education sectors in the region, operating partner Karim Idilby said.

Within both markets, “you need to peel the onion four or five times to come down to the [right] sub-segment to find out where the opportunity really exist[s]”, he said. “What the current crisis is doing is that it really brings to the fore the concept of focus on specialisation.”

Investments so far include a “value healthcare operator” called Right Health. The UAE-based venture specialises in providing medical services to lower-income workers. All of its 57 facilities across the country are “located in and around the most populated labour communities”, he said.

“This unparalleled scale and reach has enabled us to not only support the communities that we are serving but also support other providers,” Mr Idilby added.

“Now it’s about how we drive our business growth, both organically and inorganically, should the opportunity arise. It is primary care, value healthcare, accessibility and affordability – that’s what’s it is all about and this is where our laser-like focus is.”

According to a 2018 GCC Healthcare Industry Report by Alpen Capital, current healthcare expenditure in the Gulf is projected to reach $104.6bn in 2022 from an estimated $76.1bn in 2017, implying a compound annual growth rate of 6.6 per cent.

Foundation Holdings last year entered the eye healthcare space in India by acquiring a stake in ASG Hospitals. It has also formed One Living, a Dh1bn joint venture with UAE real estate developer Bloom Holding, to build accommodation for teachers and doctors at different locations in the UAE.

In Saudi Arabia, the company has invested in Promedex, a provider of medical implants and devices used in orthopedics and general surgery. The medical services firm is currently catering to 140 hospitals in the kingdom, Mr Idilby said, adding that it sees “a huge opportunity” to further expand into the kingdom.