Adnoc Distribution, the UAE’s largest fuel and convenience retailer, has signed an agreement with Indian fuel retailer Hindustan Petroleum Corporation Limited to explore opportunities for expanding their lubricants and allied products businesses in the UAE, India and other markets.
The agreement establishes a framework for both companies to foster “mutually beneficial cross-border business synergies” while leveraging their local market capabilities and infrastructure, the companies said on Monday.
The move comes as both fuel retailers look to boost the efficiency of their overseas lubricant operations, including the supply and access to logistical marketing support services.
“This agreement demonstrates our strategic approach to collaborating with leading partners worldwide,” said Bader Al Lamki, chief executive of Adnoc Distribution.
“With HPCL’s robust performance record spanning over a century, we aim to establish a strong presence in India, one of the world’s largest and rapidly growing markets.
“Today’s announcement marks another significant milestone in Adnoc Distribution’s international expansion journey as we strive to enhance our position in key lubricant markets worldwide.”
In India, the world's third-largest crude importer, energy demand has increased rapidly as the country continues to urbanise and the manufacturing sector develops.
India increased its imports of discounted Russian crude after the start of the Ukraine war last year, and is focusing on diversifying its crude supply while increasing production at home.
In February, India announced a pilot for an ethanol blended petrol called E20.
The fuel will be first made available at stations in 15 cities before a nationwide distribution over the next two to three years, India's Prime Minister Narendra Modi said at the time.
Last year, India moved up the deadline for blending petrol with 20 per cent ethanol by five years to 2025.
Adnoc Distribution is “the perfect partner for us to build our offering, as their production and marketing capabilities will be instrumental in expanding our business and footprint in the international lubricants’ markets”, said Sanjay Kumar, executive director and head of lubes SBU, HPCL Middle East FZCO.
Adnoc Distribution has been entering more sectors.
In January, Adnoc Distribution and Abu Dhabi National Energy Company, known as Taqa, said they would form a joint venture that will build and operate electric vehicle infrastructure in Abu Dhabi.
That month, the company said it also planned to reduce its carbon intensity by 25 per cent by 2030.
Adnoc Distribution's first-quarter net profit jumped 5.5 per cent to Dh551 million ($150.05 million) on an annual basis, driven by higher fuel volumes and efficiency improvement measures.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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