Church-owned micro financier SMEP in second rights issue plan

A SMEP outlet. The micro lender is planning a second shareholders’ cash call to reduce the majority shareholder’s stake in the firm to below the Central Bank of Kenya’s maximum threshold. Photo/File  Nation Media Group

By John Gachiri
 

 

In Summary

• The National Council of Churches of Kenya (NCCK) owns nearly three quarters of the Deposit Taking Microfinance (DTM) institution, which it is required to reduce to 25 per cent and below.

Church-owned micro financier SMEP is planning a second shareholders’ cash call to reduce the majority shareholder’s stake in the firm to below the Central Bank of Kenya’s maximum threshold.

The National Council of Churches of Kenya (NCCK) owns nearly three quarters of the Deposit Taking Microfinance (DTM) institution, which it is required to reduce to 25 per cent and below.

CBK regulations only allow finance institutions and the government to own not more than a quarter of shares of lending institutions.

In late 2012, NCCK floated a rights issue, which if fully subscribed would have reduced the organisation’s stake to 31.86 per cent but poor uptake resulted in the organisation reducing its stake only to 73.72 per cent.

In a notice the micro-lender has said that it is seeking shareholder approval, at the annual general meeting (AGM) scheduled for June 18, to issue more shares which will reduce NCCK’s stake to enable SMEP DTM meet the Central Bank if Kenya’s (CBK) deadline.

“To consider and if approved adopt a special resolution ‘to approve sale of additional shares to both existing and new shareholders in order to dilute the shareholding of key shareholders up to or more than 25 per cent subject to the existing laws,’” said a notice by SMEP DTM.

The Central Bank of Kenya (CBK) has given SMEP DTM up to 2014 to reduce NCCK’s stake to 25 per cent in line with regulator’s guidelines.

The first SMEP share offer approved by the Capital Markets Authority sought to raise Sh1.6 billion through the issue of 145.5 million shares at Sh11 each, but the micro-lender only managed to get Sh266 million equivalent to16.7 per cent subscription.

READ: Church-owned lender’s cash call falls short

The money from the share offer was to increase the micro-lender’s working capital (Sh900 million), revamp the ICT system (Sh200 million), branch expansion (Sh200 million) and Sh300 million was to be used to construct a new office block.

Analysts said that the second share offer should attract investors if the shares are priced right.

Johnson Nderi, head of research at Suntra Investment Bank, said investors will be attracted by a price that will make it possible to make capital gains on the stock.

“It should not be priced as if it is trading,” said Mr Nderi.

The information memorandum on the first share offer said that SMEP DTM shares were to trade on the over-the-counter (OTC) market and would be handled by Standard Investment Bank, the lead transaction advisor.

Mr Nderi said that interest rates remaining low and other macroeconomic factors being stable would make it a good time for SMEP to raise additional equity.