Griffon Capital structures Iran PE fund

The Tehran-based firm hopes to start marketing to investors pending a successful conclusion of US-Iran talks.

Griffon Capital, a Tehran-based asset management and corporate advisory firm, is structuring a private equity fund to invest in the country which, pending the outcome of continuing US-Iran negotiations, will launch within the next few months, said Griffon Capital CEO and founding partner Homan Harandian. It will be marketed to foreign investors.

Speaking to Private Equity international, Harandian said that $75 million vehicle will focus on making growth capital investments into Iran’s consumer sector in opportunities created by the size and youth of Iran’s population, including the food and beverage market and the pharmaceutical sector.

“The country is under-invested. The valuations are attractive,” Harandian said, noting that government measures had also reduced high inflation. It is not difficult to find attractive opportunities and ongoing privatisation in Iran is a good source of deals, he said. The corporate sector is moving away from banks as a sole source of funding, he added.

Over the medium term, the stock market is expected to be a route to exit. Harandian also anticipates possible future strategic sales to foreign brands that are currently barred from the country because of sanctions, that would look to buy existing businesses with distribution networks.

For the fund, the firm will speak to potential investors, including family offices and high net worth individuals, in Asia, Europe and Middle East. 

Investors are currently subject to trading restrictions with Iran and it will take some time for those to be lifted, Harandian conceded, although investors in some jurisdictions can apply for approvals.

“To invest in a chocolate factory for instance could be quite straightforward. There are no sanctions on food. The issue is how to transfer the money there,” Harandian said.

Private equity is limited in Iran, and the fund would be one of the first set up to make cross boarder investments.

“We have been discussing how to put the right structure together with different international law firms. We have been working on this for 12 months and have come a long way,” Harandian said.

The US is leading negotiations with Iran, that also involve China, France, Germany, Russia and the UK, to curb Tehran’s nuclear programme in return for lifting trading sanctions on the country. The parties had set 30 June as the deadline to lay out a framework agreement. The failure to reach a deal by 10 July means that US sanctions will remain in place at the minimum for another 60 days, according to reports.

Harandian pointed to the example of Myanmar and noted that when sanctions were lifted there “investment poured in.”