VFD Group: A Business Revolution Dream Being Fulfilled

VFD Group Plc, which recently went public on the Nigerian Exchange Limited (NGX), was founded in 2009, by 35 young Nigerians with the goal of creating Africa’s first truly diverse business ecosystem.  In an interview with Kayode Tokede, some of the group’s founding members discuss the group’s success story and prospects.

At the beginning

VFD Group commenced operations in 2019 with N2.5million as initial capital and reaching N31.5 billion in 2022, while its total assets stood at N149.1billion in 2022 compared to N3billion in 2019.

The proprietary investment company was created by a group of young professionals working in different organisations- Banking, insurance, Tech, auditing firms, among others.

The company, that started at a parking space in Lagos, Nigeria has grown to establish itself as a global company with diverse investment portfolios in Fintech, banking, real estate & hospitality, market infrastructure, non-banking institution, among others.

Among the founding members in a chat with THISDAY were: Group Managing Director/CEO of VFD Group Plc, Mr. Nonso Okpala; Managing Director/CEO of Abbey Mortgage Bank Plc, Mr. Mobolaji Adewumi and Managing Director, Herel Limited, Mr. Azubike Emodi.

Adewumi recalled their first board meeting being held in a car park, then at the GMD’s home in Yaba.  The meetings were later relocated to the Federal Palace Hotel on Victoria Island in Lagos. Okpala housed Emodi, who was initially employed by Zenith Bank, in a remote suburb outskirt town between Lagos and Ogun state.  Emodi, unable to withstand the pressures of Lagos, eventually returned to Abuja. But he returned to Lagos when more help was needed, reconnecting with other members.  Following that, several meetings were held to strategize on how to bring their vision to fruition.

Although VFD Group is now a success story, the young founders nearly gave up on their dream after a bad experience in December 2011 when their only employee vanished with the company’s transaction records.

“I recall this was a low point for us, our only employee at the time had left, taking our loan records and transactions with him,” Okpala says. “I seriously considered whether the stress of being an entrepreneur was worth it.”

“I called Zuby (Emodi), and we began to rebuild the book. We had to source all of our bank statements, emails, and rebuild the loan book from the ground up. We were giving petty loans back then, and you can imagine how time consuming reconciling N30,000 to N50,000 loans was.”

Okpala recalled that the founders faced numerous challenges while attempting to establish the company, with some members working for seven years without pay, operating expenses, and so on.

“We established the company with a diverse shareholding. 14 years later, I am proud to say that 90% of the people who founded the company are still on the board. It is a testament to a new way of doing business, and it is up to us to see the company’s future.”

Adewumi also recalled his worst experience while establishing VFD Group, when a loan advancement of N30 million was given to an unnamed listed company that went bad. He claimed that this put the young firm at ground zero.

He went on to say that because of their determination, they were able to salvage the situation, recover, and get back to business.

“When I returned in 2016, everyone was downcast because a transaction had gone bad,” Emodi said. I found myself chasing transactions in the streets of Lagos with Nonso (Okpala). As God would have it, there was a quick turnaround. During the 2016 crisis, there were numerous lessons learned.”

VFD Group has invested in companies such as Abbey Mortgage Bank, Atiat, NEM Insurance Plc, Herel, VBank, and Anchoria Asset Management, among others, and has a business model that includes: core activities in investments, funding sources, critical enablers, revenue sources, and strategic value.

Listing on the Nigerian Exchange Limited

On October 6, 2023 VFD Group listed 190.027 million ordinary shares at N244.88 per share on the main board of NGX. The group added N46.534 billion to the overall market capitalisation of NGX.

Okpala said of the listing, “From a historical standpoint, we have been market compliant from day one; broad base shareholding, global standard of governance, and a complete communicated strategy.”

“We have always focused on obtaining the right type of leadership within the company, both at the top and at the operational levels.” So we’ve been largely market compliant.

“We believe that the market, like everything else in economics, has its ups and downs.” And, for us, the future of the capital market is heavily reliant on the concentration of young people in Nigeria.

“Youth and technology account for a significant portion of our population.” So, we believe that these two factors will be the primary movers of the future market in Nigeria, and we invest in VFD largely based on trends.

“We see the trend in terms of how the market will evolve, and we see that trend not only as something to leverage by being listed on the Exchange, but also as an investment opportunity to leverage on, which is why we are bullish on our capital market investment.”

“Because we know that on the back of the number of young people who are very scalable, who are very skilled, who are very adept with technology, we think that number and the technology that is available these days to enhance that play would make it almost the frontline for any company that really wants to thrive in the country.

“So that’s the trend, but the reality is if you want to access the kind of funds that we need to really make a difference, it exists in capital markets. From the standpoint of assessing investors, institutional investors the capital market gives you that visibility.

“We also believe that, true to our business model, all of our investments are market distinct and distinct for the reason that, at some point, you would want people to have the option to exit, and because we are a long term focused company, we want our investors who want to stay long term with us to stay long term, but those who want to leave in the short term or medium term, we will give them the options to make those exits.

“I think that being in the market is very central to our overall strategy as an investment company, but also as a company that is exposed to different sectors and different companies.”

Plans to Raise N12.5billion Capital

Speaking on the planned capital raise exercise, the GMD said: “So we intend to raise N12.5 billion via right issues. But that’s not the entire amount. The total amount is N32.5 billion. That is N12.5 billion via rights issue and the N20 billion long term debt. We are very positive on raising the money via right issues because our shareholders have, over time, supported us either in co-investments or capital injection.

“So we are quite positive about the raise. We also think that the new age of trading that has been happening since we got listed is bringing in more retail people into our fold. And we think that they will also take advantage of the right issues because they will be eligible for it.

“With that funding, we intend to expand some of the investment options that we are currently exploring.” We believe that there is a need to increase investment in market infrastructure. We believe that there is a need to increase our investment in the banking sector. Bolaji (Adewumi) here aspires to be a commercial bank by upgrading the mortgage bank license. We want to be able to match other investors in his company whenever it needs to raise funds. As a result, that position is crucial.”

There are also some developmental requirements in terms of future investment in Herel Limited. So, the reality is that the more money we have, the more firepower we have, the more opportunities we can pursue, and the more money we can return to shareholders and stakeholders.”

VFD Group Investments and Prospects

“So, for us at VFD Group, the key areas that we seek to continue to turn to in terms of investment targets are market infrastructure,” Okpala added, “and that’s what we’re interested in, particularly in FinTech and technology that would enable both market infrastructure and every other aspect of our Nigerian lifestyle because, with a population like Nigeria’s and the difficulty of navigating Nigerian society, whether logistically or otherwise, technology is critical.”

“You can understand why someone would embrace digital banking if the alternative were to sit in traffic, and you can understand why someone would use a food delivery app if the alternative were to stay in his/her office and have the food delivered to him/her rather than going all the way out.”

“From a lifestyle standpoint, we believe that FinTech and technology will be a key area for us to continue exploring.” The beauty is that whatever you do well can be easily replicated in Nigeria and other African countries. That is our strategy. That is why we are looking into the same model that exists in Ghana and other countries.

“We’re also very bullish on real estate, hospitality, and lifestyle, which is what Zuby (Emodi) is in charge of, and I’m sure he has a lot to tell you about some of the projects they’re currently working on.”

“Of course, we want to move from a mortgage bank to a commercial bank.” You know, the path for that growth is obvious. Bolaji (Adewumi) has built an outstanding team at Abbey Mortgage, and I believe they can do much more with the opportunities that will be provided to them. We also believe that concentration in the insurance space is something we should investigate.

“We kind of complement some of the other investments that we make, and it allows the ecosystem we have put in place to fully thrive.”

“From a general standpoint, we have talked about an ecosystem being very central to our plan at VFD Group, and that ecosystem is based on the fact that we are invested and exposed to different companies, which have cross-selling opportunities and potential, which have collaborative potential to, in terms of harnessing synergies, which has the ability to be leveraged by technology. When you come into that ecosystem, its easy for you to acquire properties from Herel Limited, finance the acquisition from Abbey Mortgage, finance your consumer supply from VBank.

“Buy ART from ArtSplit, which is also one of our investee companies, and similar companies.” So the idea is to create that stickiness in terms of customer contact, and to provide fulfilment within that ecosystem’s proximity.  I believe that is something we will be focusing on in the next ten years.”

Why opted for NGX from NASD Securities Exchange at this time despite macroeconomic challenges and  stringent listings conditions. 

“It is forward-thinking and decisive,” said Okpala. “Also, as I mentioned, we’ve been built for the exchange since our inception.” We have a larger shareholding base, and we have more adherence to governance, self-inflicted adherence to governance, than most large companies.

“We’ve had strong leadership levels.” When you look at the people we’re still deploying, you’ll notice that some of them came from the original 35-person team that founded the company.

“So we have bench after bench of very smart, strong, proven leaders within our fold.” As a result, the opportunities that we will have are contingent on the type of funding that we will be able to obtain. And for me, that is the only limiting factor.”

“And when we talk about capital, we’re not talking about bank debt-type capital or short-term, hot money.” We’re talking about long-term funds that are relatively inexpensive and aimed at developing infrastructure from inception to maturity–these are the types of funds we want.

“And we believe we have the track record, skill set, leadership, and know-how in terms of industry and how to run those companies to profitability.” So we thought we needed to address access to long-term, patient capital suited for development, and there’s no better time than now.

Sustaining Dividend Payment

“So, one of our core values, which I believe is the most central to us as a unit is empathy-360, which is to treat people the way you want them to treat you,” Okpala said. It is critical to how we operate because the initial investment was made by 35 people, as you may recall. When dealing with 35 people, whether you like it or not, there has to be some level of governance in place; otherwise, there will be conflict; otherwise, we won’t be together for long, and so the mindset has always been to treat everyone the way you want to be treated.

“Now if you come to the shareholders, be, pre/post-listing, what you will find in common is that those 35 people are still there.

“The people managing the business are still involved. So, when we talk about shareholders’ interest, we’re talking about our own interests and our commitment is to treat them the way we would like to be treated.

“One day, I’d quit, and I’d expect the same level of treatment as I’ve given to my contemporaries.” So, what I can assure you is that our fate as investors at VFD Group is linked to the fate of other investors, whether retail, high net worth individuals, or institutional investors.

“The objective is for us to continue to work hard, make sufficient returns and distribute returns and invest forward for the interest of the company on a consistent basis.

Succession Plan

Talking about succession plan, Okpala said: “I think we started talking about succession planning four or five years ago. One of the things that makes succession planning in our view is the way we are configured, set up.

“Every point in time, I can tell you that there’s a short list of people to replace anybody that is leaving and even on the subsidiary level or the investee companies.

“One of the key things that we always look out for is succession and sometimes you carry staff cost that you don’t need to carry. But just to be sure that there’s someone that can step into the shoes of whoever.”

Abbey Mortgage’s Turnaround

Abbey Mortgage, one of the investee companies of VFD Group has witnessed turnaround since Adewumi took over six years ago. 

The company’s board of directors last month proposed a reduction of N3.541 billion from the company’s share premium capital account of N5.117 billion, saying that the reserve arising from the reduction would be deployed to eliminate the negative retained earnings as of the 2022 financial year-end.

Okpala commenting on Adewumi’s Abbey Mortgage transformation said: “The reality is that he was the one and his team that turn the fortune of Abbey around.

According to him, “Abbey has been in loss for six years prior to his takeover as MD. As of today, Abbey Mortgage Bank is now profitable. It took him one year to migrate into profitability.

“Recently, CBN approved the reconstruction of shareholder’s fund to allow them to apply their share premium into their reserve which is a statutory requirement of paying dividend and put the firm in the position of paying dividend for the first time since its existence. Adewumi has a great deal of turnaround credibility under his belt.  So, the good thing about it is that Adewumi has done justice to it, but also a testament to the realities of turnaround managers in the country.

Commenting, Adewumi said: Several banks have applied, and it did not happen until Abbey Mortgage Bank recently got approval.   I think we, initially applied and of course we’ve got the push back. You know, an institution that ran into losses for six years. You don’t just rush to give such an approval. You want a level of comfort to say well that institution is back on track.

“So we kept engaging and keeping the discussion going, and we initiated the application after some time after back-to-back profit, thorough clean-up of the books in a much more reinforced and stronger mortgage bank.”

“One of the things we looked into was the risk management process.” Pretty much everything you need is in place, and I believe they have reached a point of comfort where they can say it’s about time to grant that approval because it allows you to pay dividends.

“They just wanted to make sure it wasn’t a one-year blip in profitability, or that you weren’t going ahead and paying for it.” So they were able to obtain a level of comfort, and when they granted it to us, they stated that nobody saw this happening, even on the board level.

“I think the first thing was that the company had wrapped up losses.” So there was a lack of capital, right? However, the market had shifted. You needed new ways of thinking to structure transactions and profit from them. So you had an institution where things were still done in the old ways.

“There was recapitalisation of the institution and actual cash injection by all shareholders, and we looked at the size of the book.” At the time, the bank’s deposit liability was N6 billion. My background is in finance, so I’m just modeling and determining where we need to go to be able to do more business.”

“We started driving business development towards that point. When we  took over, deposit liability was over N6 billion but that has  moved to between  N42 billion and 43 billion and total assets  that was  N10 billion  has improved  to  N60 billion.

Also, we knew we needed to bring in new perspectives, especially to reinforce, because if you’re going to markets, you need to make sure you have the right gatekeepers in place.  So, we went looking forpeople with the right mindset and train the guys on the ground, internal control, internal audit, financial control, and so on.

“Those areas needed to be reinforced.” So that what happened in the last six to ten years does not happen again.”

Herel Limited playing in real estate  

Speaking on the Herel Limited’s operations, Emodi said: “Well, so, first, we are in business and in addition to everything else that we need to do, we also need to solve problems. Part of the most demanding human needs is housing in addition to food. In Nigeria with current population, which is constantly growing, you have a huge housing gap.

“Aside from building houses, there are so many other ways to play with real estate investments.”

 “I mean, looking at the entire ecosystem, how do we first support each other as businesses as a group before we go out?”

“Within the group, we have resources to ensure that we can play very comfortably within that space.” And whether it’s in delivering houses by acquiring land and developing it to the point where you can hold it and sell to people.”