Firms plan Sh50bn cash calls on rising business confidence

From left: Nasim Devji , Diamond Trust Bank CEO; Jonathan Ciano, Uchumi Supermarkets CEO; and Nelson Kuria, CIC Insurance Group CEO. Photos/FILE 

By GEORGE NGIGI, gngigi@ke.nationmedia.com

In Summary

• More than 10 local businesses have announced plans to raise billions of shillings in pursuit of growth plans that were frozen during 2013’s highly charged elections.
• Some companies have also recapitalised their retained earnings by issuing shareholders with bonus shares.
• KenGen is expected to be the first in the market next month with a Sh15 billion cash call through a rights issue.

Kenyan companies will be seeking to raise more than Sh50 billion in the next six months, signalling a build-up of business confidence from last year’s relative inactivity caused by election fears. 

 

More than 10 local businesses, including banks, have announced plans to raise billions of shillings in pursuit of growth plans that were frozen during 2013’s highly charged elections – offering investors a wide range of options.

Mortgage lender, Housing Finance, tops the list of companies that are hungry for cash with a Sh20 billion bond plan while electricity producer KenGen, National Bank, Diamond Trust Bank (DTB) and Uchumi have announced plans to ask current owners for money through rights issues.

Some companies have also recapitalised their retained earnings by issuing shareholders with bonus shares.

Last week Co-op Bank received its owners’ approval to recapitalise Sh700 million by issuing them with an additional share for each six held by them.

NIC recapitalised Sh270 through a bonus of one for every 10. Others that have made bonus issues are CIC Insurance and South African Liberty Holdings.

Some market watchers have expressed concern that the multi-billion-shilling fundraisers may stretch Kenya’s capital markets to the limit, leading to failure to meet targets.

Enough cash

But analysts like Burbidge Capital’s Vimal Parmar reckon there is enough cash in the economy to support the demand if well-priced for investors.

“The fundraisers are a show of confidence among these firms that the government will somewhat continue growing the economy. If the pricing is right, the liquidity is there to meet the demand,” he said. The bullish business outlook should be an encouragement to President

Uhuru Kenyatta’s government, which is facing the challenge of poor performance in key segments of the economy such as tourism and agriculture.

Tourism has been hugely affected by the persistent wave of insecurity while agriculture is being rocked by poor weather.

The expansion plans indicate growing consumer demand in spite of the continued rise in the cost of goods that pushed inflation above seven per cent last month.

Data from the Central Bank of Kenya shows that credit uptake grew at a faster pace than that targeted by the regulator, underlining investor appetite for cash.