NAIROBI, Kenya, Sep 2 – Precision Air is hopeful of receiving a go-ahead from the Tanzanian Capital Markets and Securities Authority (CMSA) to enable it list on the Dar-es-Salaam Stock Exchange in the next two months.
The airline’s Group Managing Director and Chief Executive Officer Alfonse Kioko said on Friday that the approvals would enable them to issue an Initial Public Offering (IPO) through which they intend to raise between Sh2.3 billion ($25 million) and Sh2.8billion ($30 million).
“We are not at liberty to give you all the details until the CMSA gives us the final go ahead which I think we should get in the next two weeks or so,” the CEO told reporters.
But once the green light is given, he promised to divulge details such as how many shares would be floated and their price.
Precision Air is a subsidiary of Kenya Airways which has a 49 percent stake with the remainder held by the founder Michael Shirima. The two shareholders will be expected to offload some shares during the sale.
“What is being floated in the market is the authorised but un-issued shares and so there could be some sort of dilution because we have to invite other people to also give us their money,” he explained the process.
The un-issued shares amount to 55 million but they are only reserved for Tanzanians.
This effectively means that Kenyans and other East Africans are not eligible to participate in the sale, which is unlike other transactions such as Safaricom and Stanbic Uganda which were open to all investors in the region.
The carrier, which currently has a turnover of Sh9.4 billion ($100 million), has been posting double digit growth in the last few years, a performance they intend to maintain now and in the new future.
To achieve this objective however, the carrier will have to invest heavily in fleet modernisation and expansion and which is why a huge chunk of the IPO proceeds will go into this area.
The plan is to increase the fleet (from 11) to 17 airplanes in the next two years and grow it to about 20, three years later.
“Our fleet plan is composed of two phases; fleet modernisation meaning that we are getting rid of the old aircrafts and replacing them with new ones. After the IPO, we are moving to fleet expansion such that we have the new ones but we will also add new ones,” the MD said adding that they took delivery of a new Boeing 737-300 last week making it their 11th aircraft.
With an expanded fleet, the airline will need a hangar that is big enough to accommodate the additional planes and so the firm is constructing a Sh554.3 million ($5.9 million) facility that is near completion.
These facilities will enable Precision Air to venture into new destinations as well as increase its frequencies in existing routes.
It is this conviction that has for instance seen the airline launch new flight destinations to Hahaya in the Comoros and Johannesburg, South Africa which are also served by KQ.
Although the two carriers have a code share agreement on several routes, Mr Kioko emphasised that the launch of the new flights was not motivated by competition but the need to complement each other.
“This is a question of two partners each trying to strengthen the partnership by increasing their operations. What you are going to see is a lot of synergies between the two,” he maintained adding that passengers on those routes would be the biggest beneficiaries.