Atul Shah may have walked out of the Nakumatt fiasco wealthier than when he started some 40 years ago but has left behind sorrow among the people he dealt with.
From a son of a once bankrupt father, he built an empire that grabbed global attention, including from the world’s biggest retailer WalMart, but ended just about where it all started.
Individually, Shah must be better off today even though he is fighting to save some of the assets he acquired along the way from lenders, as the properties were collateralised.
Yesterday, creditors and suppliers voted to have the collapsed supermarket chain liquidated, many aware that they would receive nothing from the disposal.
With that, the last nail had been driven into the coffin of what was East Africa’s most successful retailer just three years ago.
While Shah, who once valued his firm at Sh40 billion, does not expect to receive anything, his family amassed a fortune in property that was once rented to the fallen giant.
His family, according to the court-appointed administrator, owns 11 properties and buildings valued at Sh3.7 billion, according to an administration report authored by PKF.
Collectively, Nakumatt owes more than Sh38 billion while it owns nothing really, after the disposal of its only remaining assets constituting shelves and computers.
Naivas, which shares a history with Nakumatt, acquired the fittings and equipment last month for Sh422 million.
Peter Kahi, the court-appointed administrator of PKF, told reporters after taking the creditors’ vote that the firm had to be sold.
“Liquidation was the only route,” he said. Prior reports prepared by Kahi indicated that Nakumatt did not own any fixed property, in land or buildings, but linked Shah and related entities to owning the 11.
Unless creditors can link the acquisition of the properties by the Shahs to the collapse of the retailer and convince the courts as much, the assets are preserved.
Kahi has, however, reported that Shah and his son received unsecured and interest-free loans worth Sh1 billion from the business but are yet to repay.
Nakumatt’s troubles started when the business had peaked in 2017 at a time sales topped Sh52 billion. It also coincided with the exit of Harun Mwau, who sold his 7.7 per cent stake to the Shah family at an undisclosed price. Funds spent were drawn from the business, hence the immediate impact on cash flows.
Nakumatt could not survive the blow as it immediately started struggling to pay suppliers, to mark the start of its death occasioned by stock-outs.
The family-owned supermarket until two years ago boasted of 62 branches spread across East African capitals but does not have assets today.
Kahi was hard-pressed to explain how money will be raised to pay creditors.
The biggest losers after Nakumatt’s liquidation will be commercial paper holders who will lose Sh4 billion, which they lent to the retailer. Shah was conspicuously absent from the vote that finally ended his over 20-year old retail dream.
And when time for payment comes, to be paid first (preferential creditors) include the administrator, the Kenya Revenue Authority, the National Social Security Fund (NSSF) and former staff.
Suppliers are owed Sh18 billion and their luck to get some of the money owed will be through a 46 per cent Value Added Tax refund.
The 46 per cent is a compounding of the standard VAT rate, which is 16 per cent, and income tax, which is 30 per cent.
“Suppliers will get those refunds, the guys who will get zero are the commercial paper holders. They are not suppliers of goods so that is not vatable,” said Kahi.
KRA is owed Sh2.1 billion in taxes accrued one year prior to Kahi’s appointment, Sh78 million to NSSF, and Sh400 million to staff.
However, staff are in for a rude shock as they can only be paid a maximum of Sh200,000 no matter how long they went without pay.
“Even if it’s Sh500,000 it will be scaled down to Sh200,000. The law says we pay four months arrears of wages and Sh200,000 is our maximum,” said Kahi.
After the preferential creditors, banks, identified as secured lenders, will be paid. They include Diamond Trust Bank (Sh3.6 billion), Standard Chartered (Sh900 million), KCB (Sh1.9 billion), Bank of Africa (Sh328 million), UBA (Sh126 million) and GT Bank (Sh104 million).
Banks will now go after guarantors, some of which, Kahi said, were Nakumatt sister companies and buildings, including the headquarters.
“They have got the first charge on that property (head office),” said Kahi, who has himself earned Sh51 million for his administration services since January 2018.
Kahi, however, gave hope to creditors saying there was a chance of getting more assets if a forensic audit was done, especially on the directors, as creditors wanted to know if Nakumatt property might have been transferred to them.
He said his firm was pursuing legal options in order to chase every debtor owing Nakumatt.
He also said another option of raising more money was through pending lawsuits in court.