Exclusive: Iran Courting UK Investment Banks to Attract Foreign Investment

In a bid to attract foreign investments to Iran and pitch commercial opportunities to international bidders, Iran Privatization Organization is holding talks with UK investment banks and private equity firms, an official with IPO announced.

"As the largest investment platform in Iran, IPO has not received enough visibility among foreign investors and some even have not heard our organization's name. We want to change this," Farid Dehdilani, IPO's advisor on international affairs, who has been present in related talks, told Financial Tribune.

"We have identified prospective investment firms in London interested in our country and have gone to pitch them."

With roughly $12 billion in assets ready to be divested, Iranian Privatization Organization presents valuable opportunities for both domestic and foreign investors, which are unique in many aspects. Since President Hassan Rouhani came to office four years ago, his administration has endeavored to involve the "real private sector" in the privatization process as opposed to the quasi-government sector.

After the nuclear deal was signed in 2015, the country launched a charm offensive to mend fences with the international community and attract the much-needed foreign investment to develop the country's infrastructure.   

"London is the hub of emerging market investment firms in the world and that is why we have started from here," Dehdilani said.  

Lord Lamont, UK’s trade envoy to Iran, recently said the British government has done everything in its power to encourage the UK banks to process payments, finance trade and help business financially. He added, however, that UK banks have faced hefty fines from American regulators and are extremely cautions.

British trade with Iran has increased significantly in the post-sanctions era.

According to Lamont, in the wake of the Brexit vote, there is plenty of scope for Britain to increase its trade with emerging markets and Iran is perhaps the most exciting emerging market there is in the world today.

According to Dehdilani, the IPO delegation met with seven emerging market investment banks and private equity firms during their recent trip.

"The interest and appetite for our divestitures far surpassed our expectations," he said.  

"All agreed to ignite initial due diligence work on some of our companies and we commissioned them to submit their best plan of action for divesting these assets in a month."

Immense Opportunities in Iran

According to Economy Minister Ali Tayyebnia, Iran succeeded in securing $12 billion in foreign investment in the previous fiscal year that ended on March 20.

JCPOA–as the country's nuclear deal is formally named–has enabled foreign companies to sign contracts and transact with their Iranian counterparts. It has also lifted restrictions in shipping sector, which have further helped trade with the country.

Another IPO official pointed out that as the last major emerging market, Iran is the land of opportunity for foreign companies and investors. Having 60% of its 80 million population under the age of 35, highly educated human capital, rich natural resources and one of the highest Internet penetration rates in the Middle East, Iran is a huge attraction for any foreign investor.

"The organization has a diverse portfolio of state-owned companies worth $12 billion, which if you were to establish and replicate anyone of them, it would at least take 6-7 years to get where these companies are today," Hassan Mohammad-Tabar, an IPO board member, said.

"These companies can easily be a successful turnaround story with unmatched Internal Rate of Returns and they are all open for foreign acquisition."

Noting that risks are limited because the probability of going back to pre-JCPOA time is trivial if not zero, Mohammad-Tabar emphasized that Iran has lived up to its obligations and the world community, including the US, have asserted that.

"Investors shall not be distracted by the internal political campaigns of any country. As we have witnessed, the new administration in the US has gone from 'tearing up' the JCPOA to asserting its full compliance by Iran," he said.

 "We believe that once logic prevails, the process of investments will be very quick. The train has already left the station and it is up to the investors to hop on or stand by and watch."