LAHORE: Pakistan Kuwait Investment Company (Private) Limited (PKIC) has made an Rs500 million (~$3 million) equity investment in Planet N (Private) Limited to support the growing startup ecosystem of Pakistan.
The investment is part of Planet N’s larger $10 million round that it expects to close soon to support existing portfolio companies and for investing in new startups.
According to a statement received by Profit, the PKIC investment would be the largest equity investment by a local financial institution in a tech investment platform in Pakistan. “The investment was approved by the Board of Directors of PKIC in December 2020. This investment will not only help Planet N expand its operations, but it will also motivate other investors to explore opportunities to develop and strengthen tech entrepreneurship and disruption in the country,” read the statement.
With total assets of over Rs107 billion and equity of over Rs38 billion, PKIC is Pakistan’s leading development finance institution (DFI) engaged in investment and development financing activities in the country. PKIC was established as a 50:50 joint venture between the Governments of Pakistan and Kuwait in 1979.
On the other hand, Planet N was established in 2016 by Nadeem Hussain, a financial technology veteran in Pakistan. Planet N has invested in tech start-ups such as Tapmad TV, Dawaai.pk, PublishEx, Tez Financial Services, Datalift, PiePie, Kashat, JinglePay and others, spread across various geographies including Pakistan, the United Arab Emirates (UAE), Egypt, Singapore, and the United States (US).
Planet N currently has more than 30 companies in its portfolio focusing on financial inclusion, financial technology (fintech), digital media, data science and AI.
Diversifying risk
For PKIC, the key rationale behind this investment is that as a DFI, it is finding opportunities to support industries in various sectors. And post-Covid, the technology sector witnessed the boom like no other, swaying large investments into startups.
“As a development finance institution, the PKIC does project financing, infrastructure development, and supporting priority sectors of the economy,” Umair Aijaz, head of corporate finance and investment banking at PKIC told Profit.
“Technology is the priority sector of the economy right now and our investment has come to support this sector. PKIC has made strategic equity investments before like in Meezan Bank. Similar to that, now we have made a strategic investment in Planet N,” he adds.
According to the PKIC official, investing in Planet N was a unique opportunity because of the nature of the platform. Planet N knows the technology sector well and has made investments in over 30 companies in this sector.
This is also the reason why PKIC did not simply go out into the tech world and invest the $3 million directly into startups. “Technology is a very specialized field. As an institution, we have to look at the commercial viability of investing directly in startups. There could be a tremendous risk,” says Umair.
“The investment in Planet N, therefore, diversifies the risk and by investing in a platform, we were able to simultaneously support a good number of startups that are on Planet N’s portfolio,” adds Umair.
While this is PKIC’s first investment of this sort, it might not necessarily be the last. As a DFI, PKIC is the first one to move into the startup ecosystem of Pakistan with an investment that is sizable, and the firm finds the technology world enticing enough that if more opportunities seem viable, Pakistan Kuwait Investment Company would not say ‘no’ to it. It all comes down to the returns that PKIC gets on its investment.
“Technology sector usually gives a return of 7-10 times. Our expectation is in the similar range in the medium to long term, that is seven to ten years,” says Umair.
How would the funds be allocated?
According to Nadeem Hussain, executive chairman and CEO at Planet N, the $3 million from PKIC and another $7 million that is expected to be finalised and announced over a span of three months would be allocated for three purposes.
“One: our existing companies in which we made initial investments and de-risked them. Since we de-risked them, we want to make sure we hold our position. These startups are now raising additional funds and we are going to hold our position by using the money that we have raised,” says Nadeem.
Secondly, there are some companies that were being evaluated for investment by Planet N but investments were paused, awaiting funds. “We take our time evaluating companies and doing our due diligence. We will start funding these companies now,” adds Nadeem.
Thirdly, there are the new ideas that entrepreneurs are mulling and the new companies that would be launched and would need new investments.
“We have seven focus sectors for startups: the biggest is fintech, then we do medtech (medical technology), edtech (educational technology), agritech (agricultural technology), infotainment, the kiryana ecosystem, and then big data and AI. We are presently not into eCommerce or the last mile but we are also not restricted. We might get a great opportunity along the way and we would invest,” adds Nadeem.
Nadeem further disclosed that the investment push by Planet N into startups is vigorous and the company has finalised more than half of the $10 million that they expect to raise. “Another investment is also at a very advanced stage and we are hopeful that it might be announced within a period of two weeks.”
While PKIC is the first DFI to make such an investment, more might jump onto the bandwagon as one of Planet N’s portfolio companies has successfully made an exit, generating healthy returns for investors. The details about the exit are being kept under wraps until a formal announcement by the company.
A remarkable initiative and likely to attract others.
Amazing. Happy to see that