KUALA LUMPUR (Aug 21): The Public Accounts Committee (PAC) recommended that Khazanah Nasional Bhd report overall investment performance, not just financial results, in its quarterly reports to the Ministry of Finance (MOF) after its failed FashionValet investment.
This was one of four recommendations the PAC made following its review of Khazanah’s domestic investment governance and management following the underperformance of its investment in FashionValet.
Khazanah and Permodalan Nasional Bhd (PNB) sold their combined stake in FashionValet in 2023 for only RM3.1 million, after investing RM47 million in 2018.
Other PAC recommendations for Khazanah were to:
- Always review major investment losses and report them to the board as the standard procedure
- Improve risk planning for events like pandemics and technology changes
- Educate the public about its high-risk, high-reward venture capital strategy, explaining that some failures are expected when driving innovation
It said these steps are to improve Khazanah’s accountability and investment management.
“They actually grew by adopting an omnichannel, which is basically having physical stores as well as an e-platform. So they grew rapidly and then Covid-19 happened. Unfortunately, when Covid-19 came, we had stores undergoing renovations that still had to pay rent, but no one could visit,” Khazanah managing director Datuk Amirul Feisal Wan Zahir was quoted as saying during a proceeding on Feb 20 this year.
After the pandemic, sales improved but many brands started selling directly to customers through their own websites and social media, which slowed FashionValet’s growth and led to a cash shortage. Amirul said Khazanah, which usually invests for five to seven years, couldn’t support the company during this tough time and wanted new investors to step in.
Khazanah and PNB then sold their stakes at the end of 2023 to NXBT Partners Sdn Bhd, an investment holding company controlled by Afzal Abdul Rahim, the chief executive officer of TIME dotCom Bhd (KL:TIMECOM).
Amirul said Khazanah had no prior relationship with FashionValet and did full checks before investing. The opportunity came in 2016, and the company already had international investors, from Japan and Silicon Valley, showing its potential.
Though FashionValet had losses for five years before Khazanah invested, Amirul said this is normal for fast-growing start-ups focused on gaining market share, like Grab and Shopee, which also had losses despite rapid growth.
On Dec 4, 2024, FashionValet’s co-founders Datuk Fadzarudin Shah Anuar and Datin Vivy Sofinas Yusof were charged with criminal breach of trust involving RM8 million, but they have denied the charges. Fadzarudin and Vivy are accused of wrongly transferring RM8 million of Khazanah and PNB funds from FashionValet’s account to another company without board approval in August 2018.