The share sale by church owned micro-lender SMEP has attracted a paltry 16.7 per cent application rate, falling way below the Sh1.6 billion it aimed to raise in a highly publicised offer.
The deposit-taking micro finance institution had offered 145,454,546 shares for sale at Sh11 each, but sold only 24,241,717 shares. This saw SMEP DTM raise Sh266 million from the share sale, even after extending the offer period by 14 days in December so as to attract more investors.
The offer did not have a set minimum subscription for it to be considered successful, and was mainly intended to reduce the National Council of Churches of Kenya (NCCK’s) stake to within the Central Bank’s ownership threshold of a maximum of 25 per cent for a single shareholder.
“Successful buyers have been allotted 100 per cent of their applications. SMEP DTM has achieved reduction of control by NCCK of 26.28 per cent in line with the licensing conditions with the Central Bank of Kenya,” said the company secretary, Sam Awuor, in a statement.
Following the offer, NCCK now owns 36.86 per cent of the micro-lender directly and a similar stake of 36.86 per cent through the small and micro enterprise programme, which it owns fully.
The new shareholders estimated at over 15,000 hold 26.28 per cent. A successful offer would have seen NCCK holding reduced to 32 per cent.
“If they had done a better valuation they would have raised more as investors were concerned about the pricing,” said Johnson Nderi, head of research at Suntra Investment Bank.
He said the micro-lender had priced itself twice its sale book value, which required a high return on equity comparable to that of commercial banks.
Operations of deposit taking microfinance institutions are similar to those of banks but they are constrained in the products that they can offer and the scale of operations due to their lower capital requirement.
Last year several commercial banks were involved in successful cash calls to their shareholders, which would have raised hopes of a higher performance of the SMEP share sale.
SMEP was the third micro-lender to convert to a deposit-taking institution, receiving CBK approval to mobilise savings from the public.
The offer will provide an opportunity for the share price discovery as the new shareholders will be able to trade the SMEP DTM shares over the counter in the secondary market.
The company secretary said that the lender had authorised a facility be created for the purpose of trading the shares whose prices will be determined by market forces.
“It is possible that the shares will experience limited liquidity or moderate to high illiquidity,” said the company statement.
The church body has up to next year to reduce its total stake in the micro-financier to 25 per cent so as to comply with CBK requirement. In accordance with good corporate governance the regulator holds that no corporate body should own more than a quarter of a financial institution.
“SMEP DTM will continue engaging with the various potential stakeholders it interacted with during the offer for subscription as regards future equity, debt or other alternative financing for SMEP DTMs business plan 2012-2016,” said Mr Awuor.
The micro-lender had anticipated to increase its working capital by Sh900 million, Sh200 million for ICT upgrade, Sh200 million in enlarging its branch network and Sh300 million to set up a new office block.
However following the shortfall SMEP DTM has now dedicated the amount to enhancing its working capital for it has previously relied on credit facilities for on-lending.
Those who have subscribed for the shares have until Thursday to make payments for the new shares.