VFD Group Plc, a proprietary investor in financial services companies, is targeting a 2022 initial public offering on the Nigerian stock exchange, CEO Nonso Okpala tells The Africa Report.
The Lagos-based company has appointed Kairos Capital to help it seek Nigerian and international investors, says Okpala, who holds about 24% of the company. He plans to keep his stake after the IPO.
VFD, which started operating in 2011, currently trades on the NASD over-the-counter (OTC) exchange, an alternative market for west African securities. It became a public company in January 2019 and pays regular dividends to its shareholder base of more than 60,000. Its investments include a stake of 35% in Abbey Mortgage Bank, a majority stake in Anchoria Asset Management, and a wholly-owned microfinance unit.
The company, which more than doubled its full-year profit in 2019, also owns Everdon Bureau de Change, Dynasty Real Estate and the Transfercorp remittances service. Receipts from a main list IPO, says Okpala, would be used to build the VFD “ecosystem” which aims to provide a full range of financial services for families and businesses.
Mortgages are a key part of the strategy. According to the Centre for Affordable Housing Finance in Africa (CAHF), the number of outstanding mortgages in Nigeria in 2019 was just 113,000. The ratio of mortgages to GDP at 0.3% was one of the lowest in the world, held back by high interest rates and equity requirements of 20% for mortgage loans. CAHF says that progressive use of credit bureaux by lenders is improving risk management.
Nigeria’s mortgage market remains “very untapped, with huge potential,” notes Okpala. The company’s virtual banking platform is the “key to the whole ecosphere,” he adds. VFD has no exit strategy for its investments. “We don’t buy to sell. We buy to keep the company and integrate it into our platform.” COVID-19 impact
The COVID-19 pandemic has had no impact on the company’s operating strategy or its IPO plans, Okpala says. VFD’s first-quarter profit declined by 75%. The microfinance business was negatively affected by lockdown, with some clients unable to repay their loans.
Depending on the customer’s business, VFD was able to help with logistical advice and equipment purchase, Okpala says. For businesses that weren’t able to adapt, loans were suspended and rescheduled, with moratoriums being granted for the duration of lockdown. When a company can’t pay, “it’s best to structure the business so that it continues to exist.”
The company’s V digital banking application launched at the start of March drew more users as people needed to find a way to carry out virtual banking during lockdown, he says. VFD itself was able to save on a planned office expansion which it realised was no longer necessary. It now gives employees the option to work remotely.
“Productivity has increased” as a result meaning “a double advantage,” adds Okpala. The pandemic “has taught us a lot about the running of the company in a cost-effective manner.” The company, which has a stake in the Atiat vehicle and equipment leasing business, is considering branching out into non-core financial services businesses such as auto purchase. It is also studying expansion into foreign markets such as Ghana.
In the process, Okpala hopes that VFD will break with what he calls Nigeria’s tradition of “one-man businesses. We want an institutional strategy. Patient capital needs an institutional process.”
Homegrown companies like VFD may be better placed than foreign multinationals to tackle Nigeria’s financial services deficit.