2010 the year of Rights Issues

October 29, 2010
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, NAIROBI, Kenya Oct 29 – 2010 has been dubbed the year of Rights Issue as Sh16 billion has been raised  through the Nairobi Stock Exchange (NSE) as listed firms look to shore up additional capital.

This marks 56 percent of the total amount raised since 1988 which stands at Sh28 billion so far.

NSE Vice Chairman Job Kihumba said the mark had demonstrated the confidence listed companies have in the bourse to support business growth.

"The market (NSE) has yet again proved that it is ready to support business expansion. There is efficiency in the market which listed companies can use to fund growth," Mr Kihumba said.

During the year, TPS Serena and the Kenya Commercial Bank Group turned to the bourse to raise capital through rights issues. TPS Serena managed to raise Sh1.6 billion out of the planned Sh1.18 billion while KCB was slightly under the mark raising Sh12.5 billion out of the targeted Sh15 billion.

Despite the success witnessed with the issuance of rights, Mr Kihumba warned listed companies not overly rely on the capital markets to raise funds.

"Issuers have to be more innovative in the way they structure their capital base. I would advise that they don\’t come to the market annually," he said adding that future issuers should consider providing greenshoe options to net any additional money raised.

The NSE\’s performance has been on an upward trajectory this year.  The equities market had traded Sh77 billion by the third quarter, compared to Sh38 billion in 2009 while the bonds market had so far traded Sh361 billion.

The NSE 20 share index at 45 percent compares favourably with others on the continent with Uganda at 52 percent, Ghana 22 percent, Nigeria 11 percent and South Africa at seven percent.

The Chief Executive of the Capital Markets Authority Stella Kilonzo urged market participants to take a lead role in market innovation to broaden the range of products and enhance the systems and processes of service delivery.

They were speaking during the trading of Standard Chartered Bank\’s 15.1 million new shares at the bourse after a successful rights issue.

The bank managed to raise Sh2.5 billion with the lion\’s share of the funds expected to complete the buyout of a planned custodial business from rival Barclays Bank. The cost of the transaction is estimated at Sh1.88 billion.

The listed firm expects that the business would be critical in developing its wholesale banking product segment, as well as create a link for its Asian clients to African capital markets.

"The acquisition includes primarily the client contracts, related IT assets and relevant books and records. It will also involve the transfer of assets under custody of transferring clients," Stanchart Chairman Wilfred Kiboro said.

He said the Bank would use the excess proceeds to support its balance sheet.
 

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