A few weeks ago, Luciano Hang invited potential investors to visit Havan stores. The idea was to show the retail business model to large funds that would be the anchors (top investors) of an initial public offering (IPO). However, in fulfilling the plan of the stock exchange, Havana is adjusting to reality.

By submitting its IPO prospectus to the Brazilian Securities Commission (CVM) in 2020, the retailer intended to go public for R $ 100 billion. In March, the cost fell to 70 billion reais. Today, according to estimates of potential investors, the project has decreased to less than half: 45 billion reais.

Even so, Havan has a lot of problems. Experts draw attention to corporate governance issues and over-reliance on the face of their controller, known for his ardent support of President Jair Bolsonaro, to questions about the company’s transparency and information provided on the Investor Relations (IR) website.

The manager of a large fund in Brazil, who was invited on a tour and decided not to participate, says Khan’s political extremism could indeed be a negative factor for the IPO, seen as an important moment in the company’s management. “I have no doubt that if a fund is an anchor, it can boycott and demand a ransom,” he says. In the prospectus filed with CVM last year, Hang is presented as a risk factor. In any case, the IPO should wait, say sources involved in the process.

Corporate Governance: Last Minute Change

But there are other problems as well. Corporate governance, for example, is far from the practice of public companies. The board of directors consists of only three people, one of whom is Hang. This is consistent with the definition of Brazilian corporate law, but not the appointment of a collegial member of 5 to 11 members made by the Brazilian Institute of Corporate Governance (IBGC) for publicly traded companies.

“This is the minimum number for a variety of competencies and expertise in technical knowledge,” says Luis Marta, Research, Content and Commissions Manager at IBGC, when asked about the ideal colleague. “The board cannot be too small for diversity to exist, and not too large for consensus.”

In addition, according to him, the IBGC recommends that the executive president should not be part of a collegial body, but regularly invite him to meetings. “The board of directors must act in the best interests of the company, even if its decisions conflict with the short-term goals of the shareholder,” he says. “There are meetings that need to be held without the presence of the CEO, and this is necessary to avoid embarrassment on both sides.”

In email replies, Havan says that although it is a private company with one shareholder, it has adopted a significant portion of Novo Mercado’s corporate governance rules. Among them is the board “which has an independent director who does not have a combined position of CEO and chairman of the board and has set up several committees to ensure our good functioning.”

However, until Thursday, there was only one committee on the public relations company website, formed by one person and without specifying his area of ​​responsibility. “It doesn’t make sense to have a one-person committee because there is no debate and the workload is incompatible with the role,” says Martha. After questioning the report, Hewan added two more people to the committee, which now has three members. A CFO was also added and Hang removed from the leadership.

Havan also states in the same email that while IBGC assumes that the CEO is not a board member, “a simple search on the IR websites of some of Brazil’s major publicly traded companies is enough to ensure that such a recommendation is overwhelmingly cases are not observed. “

In any case, other methods adopted by public companies do not work at Havan either. Edson Diegoli, for example, is not only the director of investor relations and finance at Havan, but is also featured on the IR website as the managing director of other companies owned by Luciano Hang. Among them are four power generators and a shopping center manager, of which he is also a partner.

“Mr. Diegoli is totally committed to Havana. In other companies in the group in which he holds the position, he plays a strategic role without the need for physical presence, similar to the role of a board member in a public company. the company, “he wrote.” In addition, Havan is made up of people outside of the board who can not only support the operation, but also devote themselves to the IPO. “

Information about results on one page

The profit and loss press release, the so-called document that presents the company’s data to investors, has only one page. In most cases, IPO candidates are organized by the dozen. For example, the story from Privalia, another retailer trying to go public, is 30 pages long. There are also no balance sheets for previous years or the Havan listing prospectus on the IR website. You need to search for them on the Internet.

Havan responds by stating that it is not yet public and that disclosure of this information is optional. “If the Company does an IPO, it will issue a release it deems appropriate, in line with market best practices,” he says.

Without transparency, it is difficult to understand some of the numbers in the press release. Like the fact that the return on capital invested (ROIC) rose from 39.9% to 67.2% between 2019 and 2010. As well as how Havan managed to reach this level, as the percentage of competitors such as Through (suddenly Houses in Bahia) is 12%, and Lojas Americas is 4.16%.

According to the company, the profit from the litigation was a one-off amount associated with the PIS / Cofins and ICMS calculation base, which affected the margin. “The above point affected the ROIC, which was higher than the previous year,” they write. Likewise, gross margins in 2019 were the same as in 2020, and cash-generating margins increased by 6 percentage points, even with lower sales due to the pandemic.

Net income was also adjusted from BRL 499 million to BRL 919 million with funds from the R $ 555 million FIDC fund, which is not owned by Havan but by Hang. “This is an adjusted net income, taking into account the potential perimeter in which a company that goes public to investors could be if the company were a FIDC holder, which is planned for the future,” the company said in a statement. In other words, a hypothesis from the point of view of an accountant who is immersed in numbers and asks not to be named.

The web has not yet made a digital turnaround

According to managers consulted Estadão / Broadcast Also in terms of anonymity, another problem with Havan’s business model is the fact that the network is very tied to physical stores and the concept of digitization is inconclusive. But that could change quickly as stores have managed to shorten delivery times for online sales. Havan Bank is also considered a growth trajectory.

Aside from corporate governance issues, the timing for an IPO is very volatile. Khan was called in to speak at CPI Covid this week due to his involvement in vaccine procurement negotiations.

On this occasion, in a note, the businessman said that he was “silent”.