Tuskys revives IPO hopes as it meets regulator’s demands
The regulator has accepted Tuskys’ plan to settle outstanding supplier payments in four months. The deal puts Tuskys on path to free itself of regulatory restrictions that threaten to inhibit its expansion and derail IPO plans.
|Tuskys CEO Dan Githua|
The coronavirus disease outbreak has left supermarkets operator Tuskys struggling with shrinking sales and ballooning costs, producing a financial crisis and putting its IPO plans in doubt.
Moreover, Tuskys’ struggles have drawn sharp regulatory scrutiny of the company’s practices. The Competition Authority of Kenya in June slapped Tuskys with a range of restrictions after it defaulted on the payment of supplier dues. In addition to restrictions that include preventing Tuskys from opening new outlets without first seeking the regulator’s approval, the CAK also threatened to fine Tuskys or jail its executives if it failed to settle Ksh1.3 billion owed to suppliers by last week.
Tuskys has now met most of the regulator’s demands on supplier payment. The CAK revealed Monday (July 20) that Tuskys paid about Ksh2.8 billion in outstanding supplier dues last month. Additionally, the regulator disclosed that Tuskys has submitted a plan to settle other pending supplier payments in four months.
Tuskys seeks to triple its supermarket footprint
Settling supplier dues should free Tuskys from regulator’s restrictions and allow it to proceed with its expansion plans. Tuskys currently operates over 60 supermarkets across Kenya and Uganda. The retailer, which also runs fashion retail brand Mavazi, sees room to triple its existing supermarket footprint in Kenya, its home market. Notably, Tuskys has adopted franchise model to speed up the opening of new outlets.
In addition to freeing Tuskys from regulatory restrictions, settling outstanding supplier dues should also help Tuskys regain its competitive edge. Some brands had stopped supplying Tuskys supermarkets over payment delays. That resulted in empty shelves at Tuskys outlets that threatened to send shoppers away.
Moreover, Tuskys’ deal with the regulator about settling supplier dues raises hopes the retailer could soon get back on its feet and continue with its IPO plans. Tuskys aimed for IPO by 2020, but it pegged the listing plan on securing an anchor investor to inject more cash into the business.
Tuskys competitors thriving
While Tuskys seems to have fall on hard times, its rivals like QuickMart and Naivas seem to be thriving even in the face of Covid pandemic. For example, supermarket chain QuickMart has continued to open new outlets during this pandemic.
Naivas, on its part, recently secured a Ksh1.5 billion investment from World Bank’s private venture arm International Finance Corporation (IFC), coming at a time when Tuskys continues to hunt for an anchor investor ahead of a possible IPO.
Despite the difficulties, Tuskys CEO Dan Githua tweeted last week that “The Lord will not allow Tuskys to die!”