KUALA LUMPUR: The FashionValet Sdn Bhd (FashionValet) issue will not stop Khazanah Nasional Bhd from continuing to invest in start-ups, says Finance Minister II Datuk Seri Amir Hamzah Azizan.
“The FashionValet issue will not affect Khazanah’s intention to continue to invest in start-ups,” he said during Minister Question Time in the Dewan Rakyat on Thursday (Nov 14).
“Venture Capital will remain in Khazanah’s mandate and Khazanah will continue efforts to support the start-up and venture capital ecosystem while improving the control mechanism,” he added.
“Khazanah’s investment in Fashion Valet was made seven years ago. Since then there has been an overhaul in Khazanah’s investment approach and the process of choosing investments has also been tightened, including start-ups and venture capital,” he said.
Amir Hamzah said that despite venture capital's high risk and uncertain nature, it still has the potential to generate high returns.
He said the performance will be evaluated based on the investment portfolios instead of just the investment alone.
He said venture capital plays an important role in spurring economic growth and helping the country move to a high-income status through innovation and sustainable development.
Amir Hamzah said several “unexpected” factors contributed to the failure of FashionValet.
Among them is the impact of Covid-19 that led to the failure of its expansion to the brick-and-mortar space and eventual closure of physical stores. The changing trend of e-commerce platforms with many modest fashion businesses using their platform or Facebook to sell their products also took a toll on FashionValet.
“Therefore, the FashionValet platform had to be closed and FashionValet had to shift its focus to its brands which are dUCk and LILIT,” he said.
Aside from that, the firm also faced cashflow issues and challenges in raising funds.
“It tried to raise fresh funds to overcome the issue, but existing shareholders including Khazanah and Permodalan Nasional Bhd did not agree to take additional risk by increasing their investment in Fashion Valet,” he said, adding that the capital market too was challenging at that time making FashionValet’s bid to raise funds unsuccessful.
Both Khazanah and PNB in their capacity as minority shareholders played a proactive role in helping Fashion Valet by providing strategic guidance and financial advice to the highest management of the company.
“However, the impact of the challenges faced by Fashion Valet was too great, and the company’s financial situation deteriorated. To continue to operate and overcome the cash flow situation, Fashion Valet needed fresh funds immediately. But they did not receive many offers from new investors,” he said.
“The offers received were the best and agreed by all shareholders.
“Both Khazanah and PNB admit that the investments were not in line with the projected returns of their investment in Fashion Valet,” he added.
He said both Khazanah and PNB will continue to improve their administration and governance.
He added that as MACC investigations and internal audits are still ongoing, Khazanah and PNB should be given space until the process is over.
“The final findings will be used to improve governance and administration,” he said.
Amir Hamzah was responding to a question by Syerleena Abdul Rashid (PH-Bukit Bendera) on what caused the failure of Khazanah and PNB’s investment in Fashion Valet. She also asked if there would be a change in position in investments in start-ups and venture capital following the issue.
In a written Parliamentary reply on Oct 29, the Finance Ministry said that Khazanah and PNB sold their shares in the e-commerce platform for RM3.1mil to NXBT Partners last year.
This contrasts with the RM47mil investment made by Khazanah and PNB in 2018, comprising RM27mil and RM20mil respectively for minority stakes in FashionValet.
FashionValet founders Datin Vivy Yusof and Datuk Fadzaruddin Shah Anuar have apologised for the losses and announced they would step down from their positions as chief executive officer and executive director, respectively.
Vivy and Fadzaruddin are currently being questioned by the Malaysian Anti-Corruption Commission (MACC) over the investment losses linked to Khazanah and PNB.
On Nov 6, MACC searched the house of Vivy and Fadzaruddin and froze several of their accounts with RM1.1mil in funds.
The search ended at 8pm, and among the goods seized were 11 handbags and a luxury watch estimated at a total of RM200,000.
