Sovereign wealth fund Kuwait Investment Authority (KIA)-owned Kuwait Investment Company (KIC) has exited oil and gas upstream company Bawabet Al Kuwait after 19 years.
KIC realized $46.23 million from the stake sale, which it aims to invest in other opportunities in the region, it said in a statement.
The company managed a 460% return on its original investment, taking into account nearly $1 million profits in the last quarter of 2023 and previously realised returns of $72.23 million over 19 years. This translates into 24% average annual returns.
Established in 1961 as the first investment company in Kuwait and the region, KIC manages $6.3 billion worth of assets as on March 2023 and owns assets worth over $800 million. KIA, the oldest wealth fund in the world, owns a 62% stake in KIC. In 2022, KIA cut its stake in KIC from 76% to 62%.
Meanwhile, upstream player Bawabet Al Kuwait engages in natural gas exploration and operates in fertilizer and petrochemicals industries. It is owned by Egypt Kuwait Holding, which has an over 84% stake.
KIC’s key subsidiaries include Al Arabiya Financial Services, Kuwait International Fair, and KIC Financial Brokerage, among others. Its portfolio includes Egypt’s Arab Petroleum Pipelines and Kuwait Clearing Company, a financial services entity. KIC was listed on the Kuwait Stock Exchange in 1984.
The publicly held company has four operating segments—asset management, direct investments and corporate finance (DICF), treasury, and other operations. It generates most of its revenue from the DICF and “other operations” segments. The DICF segment consists of managing subsidiaries, associates, long-term strategic investments, lending, real estate, and rental activities. Geographically, it derives a majority of its revenue from Kuwait.
Global ratings agency Fitch pointed out in its March review that it expected KIC's profitability to remain volatile in the medium term given its significant exposure to valuation movements on its own investments and its low level of fee and commission income from more stable investment management activities. The agency affirmed a BB credit rating on KIC with a stable outlook.
According to Fitch, marked-to-market valuation losses reduced KIC's consolidated return on average assets ratio to 2.7% at end-2022 from an all-time high of 21.8% in 2021.