RIYADH, 25 December 2006 — Tejoori Limited (TJI.L), an investment company from the UAE, has signed a joint venture agreement with Martin Häge, a German inventor, for conducting research and development into a new, high-tech, innovative safety system for motor vehicles.
It is the company’s first venture capital deal, which will help improve vehicular safety standards significantly. Several relevant patents have been filed and will be assigned to the joint venture.
The agreement marks a significant breakthrough for small and medium enterprises (SMEs) whose capitalization, according to a market study, is less than half of the total stock market capitalization of the GCC states, even though they constitute over 80 percent of the membership of the chambers of commerce and industry in the respective Gulf states. Earlier this year, a $ 100 million venture capital company was launched in the Kingdom to help SMEs move into the manufacturing sector.
According to information released to Arab News from Dubai, Tejoori will invest $1.93 million, or 85 percent of the share capital in the joint venture. This will entitle it to nominate two-thirds of the board members of the joint venture. Martin Häge, the inventor, will own the remaining 15 percent.
The JV will seek to develop a functional prototype by July 2007 followed by serial production of the system by 2009. With the successful completion of the trial run, the joint venture partners hope to set up a plant at an estimated cost of $ 133 million. The financing instrument will be the Islamic bond, or sukuk. The venture will target clients that include leading car manufacturers and automotive industry suppliers.
Commenting on the deal, Sheikh Fawaz Bashraheel, chairman of Tejoori Limited, said: “We are delighted to sign this joint venture and invest in this exciting development. Tejoori is proud to be completing a Shariah-compliant investment deal that is also socially responsible. We will certainly consider further opportunities to invest in ideas and projects that promote vehicular safety.” Steffen Schubert, Managing Director of Tejoori Ltd., added: “When this innovative safety system is implemented, I am confident that it will significantly improve vehicle safety standards and will reduce the risk of accidental injuries.”
Earlier, the Saudi Arabian General Investment Authority (SAGIA) signed an agreement with the Venture Capital Bank, a Bahrain-based Islamic investment bank, and Global Emerging Markets (GEM), an international investment house with offices in New York, London and Paris, to help establish an independent $100 million venture capital investment company to invest in venture capital opportunities and small-to-medium enterprises in the Kingdom.
As the first such initiative in the Kingdom, the objective is to provide growth capital and late-stage financing to venture capital opportunities and SMEs in the Kingdom in compliance with Shariah principles.
Venture Capital Bank Chairman Dr. Ghassan Al-Sulaiman, GEM President Chris Brown and SAGIA Governor Amr Al-Dabbagh, signed an MOU, outlining the three parties’ intention to help develop the venture capital industry.
Venture Capital Bank will be the main promoter of the new company, whereby the bank will own a significant stake in the new company and will raise the rest of the capital from strategic Saudi investors as well as high net wroth individuals (HNWI) and corporate investors from other GCC countries.
Meanwhile, a comparative study of stock markets in the Gulf states has disclosed that SMEs, despite constituting the majority in terms of their membership of the respective chambers of commerce and industry, play only a marginal role when it comes to listing on the stock market.
As a study conducted by Kuwait Financial Center and made available to Arab News has shown, the top five companies listed on the Saudi stock market account for 54 percent of the total market capitalization.
Similarly, the contribution of the five top Gulf companies in terms of their stock market share is as follows: UAE (top five companies’ market share — 45 percent); Qatar (57 percent); Oman (56 percent); Bahrain (57 percent). At the GCC level, the top five companies constitute nearly a third of the regional stock market.
As the KFC study indicates, with the top five companies accounting for a third of the GCC stock market, this clearly leaves the SMEs in a limbo in terms of their ability to raise funds on the stock market. Yet, more than 80 percent of companies in the Gulf states are SMEs.