The NMC Healthcare disaster and the shamelessness of Gulf finance.

I had published an article expressing my shock at the abysmal corporate governance and financial disclosure at NMC Healthcare, the London listed UAE’s largest private operator of healthcare clinics and hospitals. NMC Healthcare shares were at 1816 pence on the LSE when I published my article in the Gulf and UK financial press on 30 December 2019. NMC Healthcare has now plunged to 775 pence and chump change, a victim of the same shocking lack of basic governance, norms and ethics that destroyed the criminal private equity firm Abraaj Capital, the UAE listed contractor Drake & Scull, and the multiple Al Ponzi Capital cowboys who have fleeced billions of dollars from investors in the GCC and beyond.


From Silicon Valley to Wall Street and the City of London, once again the sordid reality of abysmal corporate governance, incompetent regulators, nepotistic boards of directors, venal accountants/banksters and greed crazed management in the Middle East has shamed the region in the full glare of the world press. Is it any wonder that many global institutional investors have fled the capital markets of the Arab world in horror and revulsion? Trading volumes in some GCC stock exchanges have fallen 90% from their peaks with good reason and they are now merely illiquid retail casinos vulnerable to insider manipulation and unable to play a credible role in economic development. The NMC Healthcare disaster is only the tip of a sordid, leveraged, mismanaged corporate iceberg. I know, I have lived this reality for two decades as a chief investment officer.

There is a Sophoclean tragedy of hubris and nemesis in the life story of self styled Dr. B. R. Shetty, a humble, young Udupi pharmacist who rose to meteoric heights as one of the richest Indian billionaires in the Middle East.

B.R. Shetty, who came to Abu Dhabi in the early 1970’s, leveraged the influx of millions of South Asian immigrants to the UAE to build a network of medical clinics/hospital and foreign exchange remittance businesses that he finally listed on the London Stock Exchange to become a newly minted sterling billionaire – for a brief moment in time at least. I have only met B.R. Shetty at public events and found him an exquisitely well mannered, courteous gentleman of the old school, his thick jet black hair at odds with his 77 year old age – though octogenarians with jet black hair and goatees are a common sight in the Gulf business elite.


B.R. Shetty was the ultimate Udupi rags to riches story in the UAE. He even had a private meeting with his fellow Indian “billionaires” (most of whom are drowning in billions of dirhams in unpaid bank debt as the cash flows from their retailing empires vanish like a desert mirage!) with visiting Indian Prime Minister Narendra Modi. When Modi asked for the pantheon of Indian “billionaires” to demonstrate their commitment to his newly annexed Jammu and Kashmir, a leaked video showed B.R. Shetty scrambled to pledge such a colossal amount that an openly skeptical Indian Ambassador told him to calm down.

B.R. Shetty was venerated by the NRI elite in the UAE. After all, how much more pukka/blue chip can you get than being the founder of a FTSE 100 index healthcare company that operated in dozens of countries and employed 10000 doctors, nurses and medical staff? Who in his right mind would question a man fawned over by the UAE’s newspapers and glossy society magazines as South Asia’s gift to the Gulf, as Arif Naqvi, the convicted criminal who founded Abraaj Capital, once was before him?


Yet something was dangerously rotten at the pinnacle of boardroom power at NMC Healthcare and Finablr (the Travelex – UAE Exchange Center fusion also listed by Shetty on the LSE). When world famous San Francisco hedge fund Muddy Waters disclosed a short position in NMC Healthcare and alleged evidence of misleading financial disclosures, theft of corporate assets, non-disclosure of hundreds of pounds of debt, a litany of financial horrors that led to a 80% plunge in the stock from its 4060 pence post IPO high.

When two significant shareholders and Shetty partners from the UAE slashed their stakes in NMC Healthcare in January, I was certain the shares would continue to fall to earth with no parachute. This puppy, in retrospect, was the mother of all shorts when I published my article in December at 1816 pence and I knew it, even though I did not take a short position on my own account out of my deep respect for the dedicated doctors/nurses who serve the poor, mainly South Asian immigrant patients in the Gulf.


Man does not live by bread alone, a principle I mistakenly thought Dr. Shetty shared with me but anyone who takes a 5% upfront commission on poor laborer’s remittances to their families back home cannot exactly be called altruistic. Financial predators, alas, proliferate in the capital markets ecosystem of the Gulf, as I know all too well, being on the receiving end of assorted Joe Habibis from “Scam Me Tender” Private Banks and the “Bentleys, Bunnies and Blondies” crowd at Al Ponzi Capital. How come this carnival of financial deceit is happening in an ostensibly regulated milieu? Sometimes I just evoke the Boney M hit from my youth – I’m crazy like a fool, what about it, Daddy Cool”. The Daddy Cools of Gulf finance have ruined the lives of the investors who trusted them and stained the global reputation of the financial centres that hosted but failed to competently regulate them. The hopes of so many investors were literally dashed. I repeat – dashed by brazen financial fraud. Yet the criminals who masterminded colossal frauds walk among us, albeit some with police electronic bracelets around their ankles.

Abraaj Capital commingled funds entrusted by global investors like the Bill and Melinda Gates Foundation and the World Bank/IFC. Commingling is fairly routine in the Middle East but rightly considered theft in a credible financial market. B.R. Shetty and his partners misreported their shareholdings to the London Stock Exchange – benami accounts are a common practice in Indian and Gulf capital markets.


Drake & Scull should be renamed Skull and Crossbones because it was founded and run by a Jordanian pirate who stole billions of dollars from a UAE listed public company with impunity. NRI expat businessmen have cheated UAE banks out of almost $2 billion (actually, a lot, lot more) in fraudulent loans and have skipped town en masse to Mother India. There is joke in the Textile Bazaar that an invisible runway has been built so bank loan defaulters can take off into the wild blue yonder! This is not business – this is financial loot (the first Hindi word to enter the English language, thanks to Robert Clive, who would have become a billionaire and media celebrity had he lived in the Gulf in our time!).

Misreported shareholdings, inflated cash balances, fake financial statements, kickbacks and baksheesh, rigged contracts, idiotic, Rip Van Winkle boards, nepotism and expat tribal mutual back scratching syndicates. I have seen the sordid netherworld of Gulf financial markets and this is the reason I only invest my money in Microsoft, Google, Nokia et al. I cannot name you, one private equity house that had consistently made money for its investors in the GCC with the possible exception of Al Fajr Capital. This is why I prefer to be an acolyte of Blackstone LP and KKR.


I doubt if NMC Healthcare has any future on the London stock exchange as the UK regulator probes the embattled company and Carson Block, the German born founder of the Muddy Waters hedge fund, makes a fortune on his short position. Yet the crème de la crème of international finance must also share the blame for enabling these squalid financial frauds from the Middle East to be committed in world financial capitals. KPMG was Abraaj Capital’s auditor and supplied a partner to be Abraaj’s CFO twice and gave Naqvi’s gang a clean bill of health after the World Bank auditors discovered comingling of funds. The UAE’s top commercial banks will not give a loan to an SME but happily lent and lost $1 billion handing over depositor funds to Naqvi. A UAE budget airline lost almost a billion dirhams giving loans to Abraaj Capital, how are its CEO and its board remotely qualified to protect the interest of public shareholders who were fleeced by their recklessness? By the way, who was Abraaj’s custodian bank and have they been banned from operating in the UAE by the regulators?

J.P. Morgan Cazenove, HSBC and Barclays took NMC Healthcare public but did not bother to verify the shareholdings of its founder and his UAE partners. Hello, I was born at night, only not last night. Who are the moronic (or worse) banks who lent $2 billion to the busted, looted Drake & Scull contracting empire? Surely these incompetents should be named and shamed so that our life savings do not go up in smoke when these banksters kaput, as they inevitably will.


The real irony is that dozens of insiders in Gulf finance knew that an Indian partner of Abraaj Capital had been imprisoned on a cocaine charge in the UAE and a Pakistani senior vice president was flagged by Interpol for sex crimes in the US. Both were forced to resign but the regulator did not inform the public so they could avoid this criminal firm like the plague, as I did. These events happened almost a decade before Abraaj’s final flameout in 2018.

Insiders in Gulf finance knew that Drake & Scull was being looted by top executives years before the company was finally delisted from the stock exchange. Insiders in Gulf finance know exactly what is going on in Al Ponzi Capital, which was also planning to IPO its clinics/schools/restaurants on the London Stock Exchange. I personally saw its founder waving a letter he claimed was an IPO offer from a Swiss bank in a business meeting at a close friend’s office from whom he had conned $5 million as “investments”. Insiders in Gulf finance knew about the related party deals at NMC Healthcare. After NMC Healthcare listed in London, short positions in the stock rose to almost one third of the free float. So I was not at all surprised when Muddy Waters went public with its allegations or when Abraaj’s founder was caught with his hands in the cookie jar or Drake & Scull founder arrested in Jordan.


The next big financial volcano to explode in Gulf finance? UAE private property developers who borrowed tens of billions of dirhams in bank loans against shares down 85 – 90% from their post IPO peaks and a share price that cannot even now buy a can of Pepsi, let alone a shawarma sandwich in a Malabari café. As in 2008-09, the Gulf’s banking elite must bow their heads in shame at letting down the public and the depositors who entrusted them with their life savings. Yet shame is an alien concept in Gulf finance. I know – I have lived this circus since 1997, when I swore never to work in a bank in the GCC ever again.

The Latin verb credere is the root of the English word “credit”. Credere means to believe. Without belief, there is no credit. Without belief, there is nothing. I have lost my credere in Gulf finance and so has the world.


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Matein Khalid, Chief Investment Officer at Asas Capital

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