Uganda insurer’s IPO raises $4.5 million

Uganda’s biggest underwriter, the National Insurance Corporation (NIC), raised a better-than-expected 9.5 billion shillings ($4.59 million) from its initial public offering, underscoring growing investor interest in the east African country.

NIC’s admission to the nascent Uganda Securities Exchange (USE) was seen injecting impetus into the bourse, which took a hit from the global financial crisis as foreign investors took flight and prices slumped.

Shares, which were roughly a third oversubscribed, will begin trading on the Uganda Stock Exchange, said Jim Mugunga, communications manager for the country’s Privatisation Unit.

Retail investors were allotted 90 percent of the shares sold by the Ugandan government, which had a 40 per cent stake. Nigeria’s Industrial and General Insurance retains a 60 per cent stake in the underwriter.

Some 161.5 million shares were offered with the intention of raising 7.2 billion shillings.

An analyst at African Alliance brokerage, Keneth Kitariko expects NIC’s share price will rise modestly in the secondary market.

Oil deposits

“We do expect some correlation between the level of oversubscription and performance in secondary market, so mostly we’ll see a share price rise but the numbers will be conservative,” he said.

The discovery of large crude oil deposits has turned a spotlight on the region’s third-largest economy, where growth is expected to be 5 percent in fiscal 2009-2010 and then climb to 7 per cent the following year.

Energy Ministry permanent secretary Kabagambe Kaliisa said an oil law crucial to the exploitation of the deposits would be passed by June this year, to create a new legal environment for the country’s petroleum sector.

“The current legal framework is very inadequate in ensuring that Uganda gets maximum value from her oil and gas resources and that’s why we need a new law,” he said.

The law is expected to define how revenues will be shared between central and local governments and to institute measures to limit environmental damage from exploration.

An oil law is also expected to clear the way for a new round of exploration licenses.

Licensing was suspended in 2006 pending the introduction of a new legal regime for the industry.

The government also said a feasibility study for a refinery will be completed by July. Construction of the refinery is to commence shortly after.

Uganda discovered oil in 2006 and reserves are estimated at about 2 billion barrels.