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Americans Hunt for Business in Iran

Americans Hunt for Business in IranAmericans Hunt for Business in Iran

American businessmen are scouring Iran for businesses to buy and deals to scoop in anticipation of the lifting of economic sanctions against Iran and its opening to foreign business. They are visiting factories, networking in forums and looking for deals.

About 20 foreigners came to Tehran for a tour last month organized by Turquoise Partners, an Iranian investment firm which asked that the visitors’ names not be published for fear that competitors might swipe clients and because international sanctions remain in place, Bloomberg wrote.

The visit is one element in a rapidly shifting business landscape in Iran as investors prepare for a lifting of the sanctions if a nuclear deal is signed in coming months between Iran and world powers.

The group showed the outsiders the best-performing sectors in Iran: cement, which benefits from low energy costs; mobile telecommunications in a country of 80 million people with mobile phone penetration of 105 percent; and food and beverages, in which one firm, Behshahr Industrial Development Corp., quadrupled its profits over the past two years.

 Sizable Market

The visitors, including four Americans based outside the US, were exploring, not signing, deals so no sanctions rules were violated. And while impressed, several expressed concerns about getting money out of Iran, the skills of the local workforce and the limited banking facilities for foreigners.

The market is sizable. Stock market capitalization in Iran stands at $96.6 billion. Banking assets are $482 billion, exceeding Sharia-compliant assets in Saudi Arabia, Malaysia and the United Arab Emirates combined.

Across Tehran’s commercial districts, companies are working to win back lost international clients and restart projects abandoned when sanctions kicked in. Iranians abroad are setting themselves up as sherpas and holding conferences to match investors with domestic entrepreneurs.

In Geneva, preparations are under way for the second Europe-Iran Forum organized by Esfandyar Batmanghelidj, an American-Iranian, and his father after the event attracted companies such as Airbus, Cisco, Total and Citigroup last year.

“It’s about being in the middle of DC, London, Tehran and Dubai and having the ability to act as a platform,” Batmanghelidj, who visited Iran for the first time in 2013, said in a phone interview from the Alps.

 E-Commerce

In Berlin this week, a meeting dubbed iBridges brought together 400 Iranian tech and e-commerce companies with investors from 45 countries, Salamander Davoudi, the conference’s spokeswoman, said by e-mail.

In Tehran, a few blocks away from Turquoise’s offices, Novin Investment Bank, with €600 million of assets under management, is in talks with a number of German banks to start a modest mutual fund of €25 million.

“In the next three to four months we will get somewhere with that fund,” Masoud Gholampour, an analyst at Novin, said. “The talks have been very positive.”

Gholampour said that the prospect of a nuclear deal spurred Novin to plan a 200- to 300-million-euro bond issue. He expects the mechanics to be finalized in the next two months provided they secure an international ratings agency and a European bank to help underwrite the bond and act as a clearing house.

 Recovery

In 2012, Iran’s economy had contracted by 6.8 percent. The following year, inflation hit a record high of 40 percent. The Iranian rial lost more than two-thirds of its value during the period, and Iran’s income from its biggest export – crude oil – was slashed by 50 percent after energy sales to the European Union were halted.

Modest signs of a recovery have started to appear. Officials say inflation is down to 15 percent, and the economy may grow as much as three percent this year. The central bank expects the lifting of sanctions to allow the transfer home of $100 billion of Iranian funds frozen in overseas accounts, the official Islamic Republic News Agency reported May 31.

 Stock Exchange

At the modest, somewhat dowdy Tehran Stock Exchange, the visitors were shown the trading floor, where brokers – most of them young men and women – execute trades by phone and online, from behind rows of felt-lined cubicles.

Iranian retail investors, many of them pensioners keeping an eye on their retirement funds, gazed down on the sharp-suited outsiders from a viewing gallery above as they posed for photos beneath the exchange’s main digital display of the day’s leading stocks.

“This is what it’s all about,” one of the visitors, a London-based woman, said. “This is what an emerging frontier market looks like.”

Iranian equities present a unique long-term potential for growth. Although there are various risks to factor, Iran’s stock markets will become the largest in the Middle East, eating up Dubai Financial Market and the Saudi Stock Exchange, Tadawul. The TSE already hosts nearly double the number of companies listed on the DFM and Tadawul combined. Iran’s financial markets have already got the infrastructure.

The financial industry is growing. There are 142 mutual funds investing in various securities. Recently exchange-traded funds have joined the club. There are now 10 of them listed on Iran’s two exchanges. Investment banking is firming its foothold and other financial services are growing. There are great opportunities for the initiated.

Financialtribune.com