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Kenya

IPOs expected to pick up in 2011

NAIROBI, Kenya, Jan 17- After being out of the market for nearly three years, Initial Public Offerings (IPOs) could make a comeback in 2011, giving Kenyan investors an opportunity to co-own new public companies.

Capital Markets Authority (CMA) Chief Executive Officer Stella Kilonzo said the regulator has received several expressions of interests from potential companies that would like to sell their shares to the public this year.

“We have not had any IPOs since 2008 but we expect that this is a good time now and so we expect some of that,” she told Capital Business.

In 2008, several IPOs, which were attractively priced, were floated with the most memorable one being the Safaricom offer which was oversubscribed by nearly five times.

Although the share performance did not live to investors’ expectations, it served to bring nearly one million new investors into the stock market while it pushed the market capitalisation above the Sh1 trillion mark.

Since then, the local capital markets has been deepened as demonstrated by the growth in the equities and bonds markets. Confidence in the bourse has also been enhanced if the Sh16 billion raised through rights issues in 2010 is anything to go by.

Mrs Kilonzo anticipates that more participation will propel the market to even greater heights in 2011 and in the future.

“I expect to see additional rights issues and more corporate bonds. In the last year, we have approved several funds so we expect them to be able to build their portfolio and so we expect them to advertise and try to get more clients through unit trusts,” she said.

While calling on corporate firms to take advantage of the incentives that have been instituted in the capital markets as an avenue for raising funds, the CEO welcomed any proposal to structure various products.

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This is especially crucial at a time when the demutualisation process, which seeks to separate the private ownership of the Nairobi Stock Exchange (NSE) from its management, is due to be implemented.

It is expected that once the process is implemented in the first quarter of this year, it will help unlock shareholder value thus broaden the shareholder base at the NSE in addition to being a catalyst to transform the bourse business model to facilitate a more effective response to a competitive environment.

Mrs Kilonzo assured that the regulator has been proactive in supervising the intermediaries which has contributed to the restoration of investor confidence and in effect the good performance of the market.

“The process of license renewal is ongoing and we are also looking at the financial compliance (raising of intermediaries capital levels) before issuing the licenses. We however don’t think this will be an issue because we expect compliance,” she added.

Investment banks and brokers have been on a rush to meet the January 1 2011 deadline to increase their minimum capital levels from Sh50 million to Sh250 million and from Sh5 million to Sh50 million respectively in line with a directive issued in the 2008/2009 Budget.
 

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