Mounir Nakhla on his blockbuster IPO and why the first person he talks to each morning is someone named Apollo

Patrick FitzPatrick [P.F]: Mounir is founder and CEO of MNT-Halan. Have a seat, sir. And Mounir has just filed to go public on the EGX. So we have a block of time together in which to discuss: what prompted you to decide that after 15 years…

Mounir Nakhla [M.N]: 17. 

P.F: Seventeen years of kind of getting to choose your own shareholders, you now want to throw the thing open to everybody and her sister? Why?

M.N: I'm glad you said sister.

P.F: Habibi. I have to. I'm the father of a daughter. My co-founder is a woman. Half my ExCo is female. I have to. 

Why now? Why take that risk?

M.N: It's a function of the market. The market has been incredibly strong the past two years. If we had even considered this in early '24, we wouldn't have been able to. It would have been too small. We would have raised USD 30 million to USD 40 million — didn't make sense. 

[But] the market has been performing exceptionally well. The number of investors in the stock market [has] multiplied 3x. Daily trades [have] multiplied 5x. So Egypt's macro [is] better, Egypt's companies [are] better. So it's the right time now.

P.F: Now I'm going to ask you the most basic question in the world, but I think I have to. 

[For] 17 years you guys have been doing this. You've had some pivots along the way. You started off as a ride-hailing company for tuk-tuks, right? — [that's] the fundamental part of your origin story — today, you are the largest non-bank financial services company in the country.

How do you make money, man? What's the business model? We're in an elevator together. You've got 30 seconds on the way to the top. How do you make money as a business?

M.N: Lending.

P.F: Lending, pure and simple?

M.N: We do all sorts of financial services, but the core, core, core, revenue generator, the profit generator, is lending: anything from microfinance, consumer finance, SME lending, asset lending, vehicle financing, agricultural lending. We make money out of providing access to finance to people who otherwise wouldn't have access to finance.

P.F: Now, the business you're listing is not the parent company, MNT-Halan. It is an Egyptian unit. Can you explain to us the structure of the transaction?

M.N: We've got a holdco based in the Netherlands that owns 100% of the Egyptian subsidiary. It owns 100% of a Turkish subsidiary, a 100% of an Emirati subsidiary, and about 90% of a Pakistani subsidiary. We're listing the Egypt subsidiary on the Egyptian stock market. We're offering 20%, and probably we're launching at a fixed valuation.

P.F: Don't want to give us any hints on that today, huh?

M.N: I think it's going to be public in an hour or two.

P.F: In an hour or two?

M.N: Yeah. All the documents are at the FRA. We're waiting for the final stamp. As soon as it's stamped, it goes to the newspapers. So I think by tomorrow everything will be public.

P.F: By tomorrow we will know.

M.N: And I've got a lot of lawyers and bankers telling me, "Say that, don't say that." And they're making me stutter.

P.F: It was something of a negotiation for Mounir to agree to appear today. 

There's money coming back into the Egyptian company as the topco subscribes to a capital increase. What are you going to use the money for?

M.N: Half the money goes to Egypt. Maybe even more than half the money goes to Egypt. It props [up] the balance sheet. We can lever this three, four, five, six times. It gives us firepower to grow. The remaining half — half of that, or a quarter of the total, goes to Turkey. And then the remaining amount will probably go to another acquisition.

P.F: Can you give us a hint? Is it an Arabic-speaking country?

M.N: It depends how many questions will follow after this one.

P.F: Okay, last question on this subject, is it an Arabic-speaking country?

M.N: If it's just one, yeah, it is an Arabic-speaking country.

P.F: Okay. The transaction, the 20%, is a secondary, which means existing shareholders are selling equity?

M.N: No, no, not at all. It's a secondary in terms of the Egyptian holding company. Actually, the BV [is] selling shares in the Egyptian subsidiary. Half of that amount, or more than half, will be reinvested into Egypt through a capital increase. And then the rest of the money will not go to shareholders, as I mentioned. 

No, it's going to Turkey and into another [acquisition].

P.F: 100% gets put back.

M.N: No one's going to party big time after that.

P.F: You've been meeting international institutional investors for months now. The majority of them have not put money into Egyptian equities in a very long time. 

What's attracting them now?

M.N: I think Egypt. Egypt’s been quite stable for the past two years. 

The Egyptian stock market has a much, much larger retail base now. The retail base is creating liquidity. The performance of the stock market in the past two years has been phenomenal. So a lot of them have realized that they missed out. 

An IPO, by definition, is priced at a discount, so it's a good entry point to go into Egypt at a discount. It's a good opportunity for them to reinvest into the country and get more exposure. And then, what I realized —

P.F: So they believe we've turned a corner? That's come through for them, that we've actually turned a corner?

M.N: Yeah, I think we've turned the corner. And I think…public investors are not like private investors. 

I've been interacting with private investors for the past, call it, eight or nine years. And it's like a marriage. I want to say nearly a Coptic marriage. It's like a marriage where they do a huge amount of due diligence.

Public investors, it's a trade. Price is good? It's good, they're in. They could get out quicker if there's liquidity. So they're really optimizing for it. Do they think it's going to pop? Do they think they've got enough liquidity in the market to exit? And if it ticks these two, then — although I have to admit we've had quite a few long-only investors, and with decent-sized tickets, double-digit, not single. 

I'm seeing very, very serious interest. So we're going to see when we open the book and the orders come in. But I'm seeing strong interest.

P.F: What is the hardest question or the most common question that you get asked by these guys?

M.N: Hardest?

P.F: Hardest.

M.N: None. I love questions.

P.F: What's the most common question?

M.N: Common question?

P.F: What are they most concerned about?

M.N: The most common question is usually about the long-term sustainability of the business and our moat, barriers to entry, what gives us a unique proposition in the country? Why do we think we're ahead of everyone else? 

These are the common questions. More strategic and less nitty-gritty.

P.F: So we want to get into strategy, and you are no longer the poster child for Egypt in every investor meeting. Every investor meeting was about the macro, not about the company. [Now] you're getting questions about the company.

M.N: Yeah, we're getting questions about the company. People are much more comfortable about the macro.

P.F: Nice. You are asking investors to buy into a business at the same time that a lot of people — you can almost hear them salivating — "There's a bubble. There's a bubble." Is there a bubble in consumer finance?

M.N: A bubble? 

P.F: A bubble. 

M.N:There's no bubble. No, there's no bubble. Think about it. Very basic. Let's go to basics. 

Egypt has 5 million unique credit card holders. 35 banks have been working for 35 years. They've distributed lots of credit cards, maybe 10 million, 15 million credit cards. But the unique credit card holders are 5 million, maybe 5.5 million.

We come into the market with a unique proposition of a card that's a prepaid card linked to the app, [a] consumer finance limit. In a span of two years, we distributed 1.6 million cards. 

Okay. What does this tell you? It tells you there's a huge market out there. 

So think of a country like Turkey. Turkey has what? Turkey has 40 million unique credit card holders.

Think of Nubank in Brazil. What did Nubank do in Brazil? They were printing cards, distributing cards, making it user-friendly. Connect to the app. Use. They've banked most Brazilians.

Think of an average Egyptian living in Sohag, in Minya, in Dakahlia, Qena, in Kafr el Sheikh. How comfortable are they walking into a branch with a security guy sitting outside and a guy wearing a tie inside to apply for a credit card? Very uncomfortable. 

Going to a red-brick building where their neighbor is telling them, "Come and sign this. Connect to this." It's much more comfortable.

P.F: If we have so much room to grow, what does the endgame look like for the industry, and how long do we have to get there? How many more years of incredible growth are left? And what does the end state look like when you can say that the industry is starting to mature?

M.N: When the numbers say that.

P.F: How much time do we have?

M.N: I don't know how much time. It's a function of how many people. 

The question is, do you think we can get to 40 million people, like Turkey, having credit cards or consumer finance limits? If the question is that, and we're at 5 million, 6 million, 7 million, then you've got 4x. Is this going to happen in 20 years or 10 years?

Actually, the main issue now is less the demand side and more the supply side. Now everyone's focused on risk. Everyone's focused on who to lend [to], how much to lend, scoring models. It's less about the demand side and more about the supply side and the scoring side.

P.F: What has happened to your NPLs over the past 12 months?

M.N: They've increased about 1% to 1.5%.

P.F: So, in check?

M.N: Totally in check. Yeah, totally in check. It doesn't mean we're happy with them. It's more pressure on the P&L, but totally within budget and totally acceptable.

P.F: Is there a signal that you could see that would say, "I need to accelerate loan growth" or "tap the brakes a little bit", coming up in the next quarter or two? What would that signal be that you're looking for? What says, "Go deeper", "Go as is", "Go slower"?

M.N: I can't give you a blanket answer to that. It's a granular answer. 

We've got, call it, seven or eight types of loan products. Some of them we're accelerating very, very strongly because they've got incredibly great net interest margins, low risk, great economics, and some have higher risk and worse economics. So we have our brakes on those. 

So [it's] just optimizing your portfolio segmentation. And basically, what we're solving for is sustainable bottom-line growth.

P.F: What category grows the most next year?

M.N: I think there's also tension between products. Small business loans are by far the most profitable. Incredibly good margins, incredibly low risk. But the whole market isn't growing as much as we would like it to. 

The consumer finance, the card and the app, that type of product, that's growing incredibly fast.

Now we have north of 750,000 unique borrowers that are active out of a total of 1.3-some million. And that's growing very, very fast, with a slightly higher risk. But we also have higher net interest margins, so the pricing adjusts for that as well.

And those are customers we can retain more. They're very, very sticky customers. Once they're onboarded, you don't lose them. They have a card in their pocket. They use it four, five, six times a month. So it's a good product.

P.F: We're very rapidly running out of time, and I need to ask. You've talked about indicators multiple times in the conversation, looking at the data, and you've told me recently that you talk to someone different each morning, this person named Apollo.

M.N: Yeah, that's true.

P.F: What's Apollo?

M.N: Apollo.

P.F: Yeah, tell us about Apollo. 

M.N: Okay, so Apollo is the brainchild of my co-founder, Ahmed Mohsen. And he comes to me: "You need to meet Apollo." And I tell him, "Who's Apollo?" And I like the name. I have to admit, I like Apollo. I like that. 

P.F: So the brand — 

M.N: … He knows I like planets and movements of planets.

So anyway, Apollo comes, and it's an app, and it's basically "speak to your data". It was built not on Claude, [but] on open source. Now we have another one that's linked to Claude, but this one is open source. 

And basically, I can ask it anything. I can ask it, "How are we performing?" Then I can ask, "Are we optimizing on pricing? In which areas? Which managers are higher-risk managers? How do I contain risk? How do I expand growth? How do I expand margins? Which portfolio should we offload? Which should we keep on books?" And Apollo just keeps on chatting with me. 

The problem is, I nearly chat more with Apollo now than ChatGPT. ChatGPT is more personal. Apollo's more professional. Between these two apps, if they would speak up one day, I think —

P.F: You're going to be in trouble.

M.N: I'm in big trouble, so I'm glad…

P.F: Are you going to roll out a version of Apollo for the whole staff?

M.N: Yeah. Now the version of it that's linked to Claude is already with the risk team and with some teams of the call center: transcribing calls, getting all the problems, summarizing them. A lot of our reporting now is even done through it. A lot of business decisions are coming about [through it].

It's been a slow start, but it's now gaining a lot of momentum. And I think in the next three months it will be disseminated to many, many departments within the company.

P.F: What is the best thing that Apollo has done for you recently? Is there something that stands out? A use case?

M.N: The last week of every month — I've got a lot of people in the company managing collections and managing risk. Knowing who I should be calling every day and what to discuss with them — Apollo tells me: "Speak to this guy. Talk to him about this. You have this weird client that they disbursed a big amount of money to last month, and he missed his first installment. Someone needs to be asked about that." 

And things like that just keep on popping up.

P.F: So it surfaces stuff for you every day.

M.N: Very soon, I think Apollo will replace me. That's scaring me. The more I listen to Apollo, and trust it…

P.F: And trust it. 

M.N:…over my own opinion. In the beginning, I was contesting the logic: "It doesn't know what it's speaking about." But now I'm starting to worry. I'm glad I'm 48 now.

P.F: We're still young, man. We've got to cling to that. What is something Apollo has been wrong about?

M.N: Quite a few things, actually. Apollo is like ChatGPT. They're programmed in such a way that they manage psychology more than substance. 

So if you're chatting with ChatGPT and you tell him, "Hey, buddy, you're wrong about this," he says, "Oh, you're probably right. Let me revisit this." That's real psychology. They're not telling you, "No, you're the idiot." No, they're telling you, "Oh, you're probably right."

But predictive — I'm going to tell them, "What's your prediction for month-end closing? Give me a prediction." And I tell them, "No, but calculate the weekends. We only have two working days, not three working days." Sometimes it overlooks weekends, working days, things like that. So that's where it goes wrong sometimes.

P.F: Mounir, thank you for joining us today.

M.N: Thank you so much, Patrick. Thank you, everyone.

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