CMA reaps big from fundraising at stock exchange

• In the past six months three lenders — Diamond Trust Bank (DTB), CFC and NIC Bank — and the Kenya Airways have issued additional shares to their shareholders to expand capital base while CIC Insurance and Longhorn Publishers listed at the Nairobi Securities Exchange (NSE) by introduction
• Fees earned by CMA so far are 20 times the Sh4 million paid out to the NSE as commission.

Capital Markets Authority (CMA) has come out as a major beneficiary of the recent flurry of fund raising and listings at the stock market, netting more than Sh80 million in approval fees.

The capital expansion ventures have brought shine to market players’ revenues as well in a period of dipping performance with the issuers spending more than Sh1 billion on marketing, regulatory approvals, accountants, legal and transaction advisers.

In the past six months three lenders — Diamond Trust Bank (DTB), CFC and NIC Bank — and the Kenya Airways have issued additional shares to their shareholders to expand capital base while CIC Insurance and Longhorn Publishers listed at the Nairobi Securities Exchange (NSE) by introduction. Consolidated Bank issued the first tranche of a Sh4 billion corporate bond in June.

“It is going to strengthen our balance sheet in the end-year results. In our case it is an issue of timing as we could not report on future earnings,” said Mr James Wangunyu, the CEO at Standard Investment Bank, which was lead sponsoring broker in the Kenya Airways and DTB issues.

Brokers reported a dip in profit for the first six months of the year owing to low brokerage commissions but the activity in the capital markets will boost their end-year performance.

Standard Chartered Bank, which is raising Sh3.2 billion through a rights issue, is yet to release its information memorandum which outlines the costs incurred in raising the funds.

But the fees earned by CMA so far are 20 times the Sh4 million paid out to the NSE as commission. Unlike the bourse fees which are capped at Sh1.5 million for initial listings and Sh500,000 for rights issue, CMA approval fees are 0.25 per cent of the offer value.

“The bulk of the money goes to CMA and the general feeling in the market is that it should be capped,” said an investment banker who requested anonymity to avoid antagonising the regulator.

Cost of raising the funds in the rights issue averaged four per cent underlining the preference of shareholders for capital over bank financing during a period when interest rates were sky high.

The cost is, however, still viewed as high and a hindrance to listing at the bourse. Longhorn and CIC Insurance which listed their shares earlier this year have reported a decline in profits with CIC attributing the drop to the cost of listing.

“Exceptional items relate to expenses incurred with respect to the demerger which was actualised in January and expenses towards listing the group,” said the company during the release of its half-year performance.
CFC Stanbic cut its expenses by using its subsidiaries as transaction adviser, sponsoring broker and underwriter for a sum total of Sh200 services which cost DTB Sh6.9 million, without an underwriter.
Marketers also benefited from the company activities with Sh142 million set aside for advertising, marketing and public relations.
Auditors, PricewaterhouseCoopers (PwC) and Deloitte and Touche, have shared the business of the seven companies between themselves with PwC earning about Sh14.6 million and Deloitte Sh8.6 million.
PwC revenues were boosted by its handling of the large KQ rights issue which sought to raise Sh20.6 billion.
Legal advisers earned Sh20.8 million with Hamilton Harrison and Mathews Advocates big takers owing to their role in the KQ rights which had slotted Sh9 million for legal fees and at NIC Bank rights.

gngigi@ke.nationmedia.com