Equity shelves plans for secondary IPO

Equity Bank has shelved plans to raise additional capital through a secondary IPO or rights issue that was meant to support its fast-growing business.
James Mwangi, the bank’s chief executive, has said that Equity has generated enough internal funds to support its growth.

“Our capital ratio is still at 18 per cent. The trigger is 15 per cent,” said Mr Mwangi in an interview with the Business Daily on Tuesday. “The organisation has given us a pleasant surprise by generating enough funds to finance our growth.”
In March, the bank said it was planning a secondary IPO in 2013. It has ruled out moving out of East Africa — where it has operations in Uganda, South Sudan, Rwanda and Tanzania — in the short term as it strengthens its current business.

New shares

The bank listed on the Nairobi Securities Exchange (NSE) in 2006 through introduction — which does not involve issuing new shares or raising fresh capital.

A secondary IPO is where a company that is already listed offers new shares to non-shareholders to raise capital for growth. Equity was expected to join Mumias, among firms listed on the Nairobi bourse, to opt for this financing model.

In May, Mr Mwangi told Reuters that the bank could consider an overseas listing , with London, South Africa or New York bourses being on the radar of the lender.

With operations in five east African countries and a preference for rolling out banking services targeted at the lower end of the market, Equity has become one of Nairobi’s most actively traded stocks and a favourite of foreign investors.

Africa’s small but fast-growing companies are increasingly looking to do dual listings, particularly in London, to raise their profiles among foreign investors.

“We are doing in the region what we did in Kenya (increasing financial access at the bottom of the pyramid). Investments are already done so any growth goes to profits,” said Mr Mwangi on Tuesday.

Its net profit increased 13.8 per cent to Sh8.3 billion in the nine months to September while the lender’s share price is up 27.6 per cent over the past year to the current price of Sh24.50

“We have the cash to fund SMEs and corporates coming for funding from us without raising capital this year but 2013 will provide an opportunity for us to consider an IPO (secondary) as we have never had one or a rights issue,” said Mr Mwangi in March.