KUALA LUMPUR (Nov 1): Khazanah Nasional Bhd and Permodalan Nasional Bhd (PNB) have come out separately to defend their investments in FashionValet (FV) that resulted in losses for the two government-linked institutions.
Both of them said that investment in 2018 was in line with the then government’s call for government-linked investment companies (GLICs) to support the growth of high potential Bumiputera companies operating in the new economy.
"We regret the loss incurred which amounted to RM18.7 million after sale proceeds received of RM1.3 million, but they should be viewed relative to RM337 billion in investment assets managed by PNB and the RM16.4 billion in investment income generated after accounting for this loss in FY2023," said PNB in the statement.
Khazanah invested RM27 million and PNB RM20 million in FV. The two GLICs have been hit with intense criticism after the Ministry of Finance on Tuesday revealed in a written parliamentary reply that the two GLICs lost a total of RM43.9 million from the sale of their minority investments in FV.
The duo sold their minority stakes to NXBT Partners Sdn Bhd, an investment holding company controlled by Afzal Abdul Rahim, the chief executive officer of TIME dotCom Bhd (KL:TIMECOM), at end-2023.
Khazanah also holds a 32.34% stake in TIME dotCom as of July 22 this year.
NXBT now owns 51.25% of FV, according to data from the Companies Commission of Malaysia. The second largest shareholder is Datuk Fadzarudin Shah Anuar with a 17.65% stake, followed by MyEG Capital Sdn Bhd — a subsidiary of MyEG Services Bhd (KL:MYEG) — with a 5.78% stake.
PNB clarified in the statement that all of the investment proceeds were invested in the fashion e-commerce platform to fund its growth plans and not to the existing shareholders of FV, which included the founding entrepreneurs — fashion influencer couple Fadzaruddin and Datin Vivy Yusof.
"Unfortunately post investment, FV was significantly impacted by the Covid-19 pandemic. The lockdowns hindered the operation of physical stores, after investing substantial capital expenditure to outfit these stores, leading to cash flow challenges that also affected FV’s online platform business," PNB said in a statement.
"In summary, FV represented a genuine venture capital investment aimed at supporting a high-potential Bumiputera company, but their business was unfortunately severely affected by Covid-19 and changes in retail trends. PNB remains committed to being judicious and careful in its investment decisions, governed by a rigorous due diligence and approval process," it added.
'Investment follows detailed evaluation'
PNB clarified that the investment followed its private investment's "detailed evaluation and due diligence process". The investment, undertaken at fair market value, reflects the firm’s revenue growth of approximately 60% annually over the past three years, it added.
PNB also highlighted that the investment was made using its proprietary fund and not the unit trust funds under Amanah Saham Nasional Bhd (ASNB) subscribed by the public.
In the same vein, Khazanah in a separate statement said its investment rationale was anchored on the theme of offline-to-online e-commerce, as well as its commitment to support Malaysian entrepreneurs and promising early-stage companies.
However, due to the Covid-19 pandemic, Khazanah said FV had to shift its focus from being an e-commerce platform for Southeast Asian brands to growing its wholly owned in-house brands, namely Duck and Lilit, to protect operating margins and cash flow.
"The company also took measures to rationalise costs and streamline operations, but continued to face challenges, including in securing capital during the difficult fundraising environment in 2022-2023," it said.
"As the sovereign wealth fund of the nation, Khazanah will continue to invest responsibly and manage assets towards sustainable multigenerational returns for the country," Khazanah added.
'We failed our investors'
Earlier on Friday, FV founders Vivy and Fadzarudin in a joint Instagram post announced that they have both stepped away and relinquished their positions from the company.
The couple said that the company attempted to expand its business "too aggressively, and did not sufficiently plan for a rainy day", by investing heavily in its technology stack, grew the team too quickly and added too many retail stores.
The founders acknowledged that they made the mistake of scaling the company in anticipation of continued growth, but were left exposed when the pandemic hit.
"We want to state from the onset that we take full responsibility for the failure of the investment. As the two people who were responsible for managing the company, the buck stops with us — and the fact is that we failed our investors," the statement read.
"Most of all, we are very sorry for the controversy this has caused Khazanah and PNB. They have always acted professionally and in the best interest of their organisations," it added.