Capital Markets

DTB high uptake of shares dashes Habib Bank hopes to boost stake

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DTB managing director Nasim Devji said Habib Bank took up its entire allotted shares. PHOTO | SALATON NJAU

Pakistani-based lender Habib Bank’s hopes of significantly boosting its stake in Diamond Trust Bank have been dashed by high uptake of shares in the recently concluded cash call.

The subscription has limited untaken rights to just five per cent, to be allocated proportionately to all applicants.

Habib Bank intends to increase its shareholding to at least 26 per cent in the next five years from 11.91 per cent as of March this year.

READ: DTB rights issue raises the bar for Habib Bank’s higher stake interest

DTB group managing director Nasim Devji said that Habib Bank took up its entire allotted rights and applied for additional shares, but due to the subscription rate of 440 per cent it will only get five per cent of its surplus application.

Additional shares

“They will only see a marginal increase in shareholding, alongside that of everybody else who applied for additional shares with a view to increasing their shareholding due to the oversubscription. If they want to increase holding in DTB they have to go to the market,” said Ms Devji.

The rights issue information memorandum shows Habib Bank’s holding in DTB stood at 11.91 per cent or 26.208 million shares, second after AKFED that held 17.32 per cent.

READ: Top investors boost Sh3.6bn DTB rights issue

The bank offered the rights at a ratio of one for every 10 ordinary shares held, translating to 22 million rights shares at a discounted price of Sh165.

This means Habib’s allotment from its holdings amount to 2.62 million shares, while the number of additional shares allotted will be known by August 25.

If Habib was to enter the market for top-up shares to push its holding to up 26 per cent, it would need approximately an additional 34 million shares—less its additional allocation in the rights issue—which at the current price would set it back Sh8.32 billion at the market price of over Sh244.

Habib had set aside Sh3.6 billion ($43 million) to acquire an additional 31.5 million DTB Kenya shares—before the rights issue—at an estimated price of Sh114 per share.

The bank has presence in over 25 countries including Kenya where it has three branches in Nairobi, Mombasa and Malindi.

Rights issue results published on Wednesday show investors offered DTB Sh16 billion against a demand of Sh3.6 billion, an oversubscription of 340 per cent underlining the appetite for the counter which has gained 41 per cent over the past one year.

READ: Investors offer DTB Sh16bn in cash call

Rights shares taken up in the offer including by all major shareholders were 78.93 per cent, leaving only 4.63 million rights to lapse. The value of additional share applications for the lapsed share rights came to Sh96.9 million, which DTB will allot on a pro-rata basis of 5.83 per cent.

The oversubscription also indicates there is a huge amount of investable funds in the market, which will come as a boost to other banks which are planning similar capital raising ventures in order to meet enhanced regulatory capital requirements.

DTB wants to use the cash to expand its agency and mobile banking operations, put in additional capital in its Uganda, Burundi and Tanzania subsidiaries as well as move into new markets in DRC, Madagascar, Mozambique, South Sudan and Rwanda.

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