Myanmar 2017: Investments to chase consumer, tech, financial service themes

Photo: Juliet Shwe Gaung. Sule Pagoda in Yangon.

Myanmar has witnessed several region-focussed private equity funds, investment firms, VCs and even development organisations chasing deals centered around the emerging consumer space, technology and financial services in 2016

With a population of 54 million and GDP of about $65 billion, the country has been on the radar of foreign private equity firms since 2011. However, it is only now that the pace of investment seems to be picking up after the new civilian government took over reins in 2016.

Dealstreetasia has put together some dominant themes and developments in Myanmar’s investment economy in 2016 and some trends to watch out for in 2017.

Delta Capital & Anthem Asia have a busy year

Delta Capital Myanmar has been an active private equity player in the country since 2013. Delta started as a partnership between Hong Kong based Simon Murry & Company and Myanmar-based Serge Pun & Associates. A dedicated Myanmar-focussed PE fund, it is in the process of raising a $100 million second vehicle this year. To date, about $30 million has been raised for the Fund II.

The company had raised about $50 million for their first fund – Myanmar Opportunities Fund I. Delta Capital has made five investments from this fund – in oil and gas, alcoholic beverage manufacturing, Internet service provider, a local business conglomerate and in a domestic PET bottle manufacturer.

“The bottle manufacturing (investment) is a good example of (the investment company) getting exposure to a fast growing consumer market. Beverage market in general and alcoholic and non-alcoholic segments are growing by 20 per cent year on year right now,” said Dominik Burckgard, executive director at Delta Capital Myanmar.

The sixth and the last deal from fund I was in an IT services company. “We hope we can sign principle terms by year-end for our sixth deal,” he said.

Delta Capital makes an average investment of $6-$9 million for a stake of anywhere between 10 to 40 per cent, revealed the company officials.

The establishment of a second fund comes on the back of the success of their first fund. The Myanmar Opportunities Fund I has already had a partial exit – from the diversified business conglomerate with exposure to real estate, financial services, hospital operations – revealed Burckgard.

For Fund II, they are already in advanced discussions with several prospects. The anchor deal is likely to be in the consumer space and is expected to be formalised in the first quarter of the current year. “It is really based on all the deal work that we have done in 2016. It has been an incredibly active year,” he added.

Similarly, Anthem Asia, which describes itself as an investment holding company, has made nine investments in the SME space in the last few years. 2016 saw the firm investing in two big deals – digital agency Rivo Tech and Rangoon Tea House group.

“We started small but we have always intended to move to larger deal sizes as we our portfolio grows,” said Josephine Price, managing director & co-founder at Anthem Asia.

“In 2016, we checked opportunities thrown up by emergence of the Myanmar consumer,” said Price.

The company’s investment portfolio includes Thalon International School and Revo Tech.

According to her, the relatively smaller investment amounts are “a reflection to the fact that most of the interesting business are currently small.”

Another notable player in 2016 was Myanmar Investment Group, which took up  a 40 per cent stake in Paradiso Cinema Co Ltd (a JV venture with a local company Maze), which plans to construct 100 cinemas around Myanmar with an estimated project cost of $20 million.

PE landscape in Myanmar

The frontier market saw two of the biggest PE deals in 2014 and 2015 when US-based TPG Capitawhich invested in Myanmar Distillery Company (through the TPG Capital Asia Fund in 2015) and in Apollo Tower (through TPG Growth fund). The two deals were worth around $200 million.

AIM-listed Myanmar Investment International (MIL) made its first investment in 2014 in Myanmar Finance International Ltd. The second investment of $30 million was in Apollo Towers Ltd. MIL is said to be in the process of closing a couple of other investment deals.

Meanwhile, Singapore-based Credera Group is said to be raising $100 million for a Myanmar-focused fund in 2017.

Golden Rock Capital, a Myanmar-focused PE firm is also said to be looking to raise $100 million fund. By mid 2016, they had raised $20 million, (for investments focused largely in the consumer and service sectors).

Also, local advisory firm Katalysts is planning to invest up to $100 million in 2017 to invest in “promising opportunities” .

“We believe that there are very attractive opportunities to put money in  – consumer, financial services, tech and the industrial sector to some extent. We focus on identifying leading Myanmar businesses and entrepreneurs with a track record and are active in key growth sectors of Myanmar’s economy,” said Burckgard.

He said the overall deal activity in 2016 was subdued as compared to 2014 and 2015.

Having an election in November 2015 and the transition of the new government did not help the deal environment. The new government took about three months from April to June to reorganize Myanmar Investment Commission, an agency responsible for reviewing foreign investments. The figures form the Directorate of Investment and Company Administration shows that there were 71 business were approved for the financial year of 2016 up to November 2016. Back in 2015 from April to November for the same period, 129 businesses were approved.

The updated foreign investment law and the regulation is expected to be officially released in 2017. The Myanmar Company Act is also being modified. “For foreign investors, one of the key elements that hopefully will change soon is to simplify the process and also allow foreign investments in local companies,” said Burckgard.

Development institutions

Development institutions like the International Finance Corporation (IFC) have been steadily increasing investment outlays for Myanmar. As of September 2016, IFC has made a portfolio investment of $386 million in Myanmar, which is expected to go up to $800 million by June 2017, according to Vikram Kumar, country manager of the IFC in Myanmar.

Other active development institutions include the US government’s Overseas Private Investment Corporation (OPIC) ( did its first funding – a loan disbursement of $250 million – to Apollo Towers Myanmar) and the Norwegian Investment Fund (Norfund)  that invested  $1.4 million in the microfinance venture, Myanmar Finance International Ltd ( taking a $25 per cent equity interest) in 2015.

Future investment

According to Burckgard, the global Myanmar-focussed PE funds and VCs are expected to focus on the consumer and the tech space. The payment and micro finance platforms are also attracting investment interest. “We have seen a lot of investment interest in 2016 in those areas (consumer, technology and financial services) and I expect this to continue in the next year. That is where our focus is,” he added referring to Delta Capital’s plans.

Private equity approach would not change so much year to year as one is following a longer trajectory to create value, opined Anthem Asia’s Price.“To use the cliche, we are like an oil tanker, things don’t appear to change very much on the surface but over time we reach our destination. The secret for doing well is to continue to do the right thing and to believe in the long-term demographics of Myanmar,” she said.

Also Read:

Myanmar slowly adapts to embracing financial investors

Myanmar: Need to find investment opportunities for available capital, says YGA Capital’s Thura Ko Ko

Myanmar PE firm Delta Capital hits first close at $30m for second vehicle

 

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.