Capital Markets

AA Kenya cleared to raise Sh229m in new capital

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Automobile Association of Kenya (AA) employees led by their CEO Francis Theuri (in suit) at a past event. PHOTO | LUCY WANJIRU | NMG

The Automobile Association of Kenya (AA Kenya) has received the Capital Markets Authority’s green light to raise Sh229 million of new capital through a restricted offer.

This means that the exercise will not be open to the public but limited to existing shareholders and employees.

The entity will be looking to raise Sh229 million in what insiders say is a test case being used to pave the way for a larger ticket fundraising through an offer targeted at the wider public further down the road.

This is the second restricted offer being approved by the CMA in under a week. Last week, the market regulator okayed the issuance of Kenya's debut Sukuk by Linzi Finco Trust seeking to raise Sh3 billion.

AA whose offering to members includes roadside assistance, information and advice about the purchase, maintenance and repair of vehicles received CMA’s approval on Wednesday afternoon and communicated the same to shareholders on Thursday morning.

Read: AA Kenya selling shares at Sh50,000 in capital raise

Other services offered by AA Kenya include motor vehicle valuation, negotiation of insurance premiums and setting up of petrol depots.

The announcement of the capital raise comes just a day after AA Kenya announced the introduction of Signature Membership at Sh3,000 per vehicle annually and Champion Membership for non-vehicle owners at Sh200 annually, as it looks to ramp up its membership.

In early 2022, AA Kenya attempted to raise capital through demutualisation, or sale of shares to new members, before running into headwinds owing to the structuring of the entity as an association and being in disregard of the law’s requirements regarding capital raising.

The entity has since transitioned from an association into a public company, setting the stage for its planned capital raise.

According to the latest available data, AA Kenya reported a net income of Sh11 million in 2020, down from Sh79 million in 2019 attributable to the impact of the Covid-19 pandemic on its business.

Sales over the same period declined to Sh472 million from Sh722 million. AA Kenya projected its revenue and profits to grow exponentially over the medium term from the actual performance seen in the past.

The company, at the time, did not publish its balance sheet which would show its assets and liabilities.

In the past, AA Kenya has indicated that the need for capital raising was informed by, among other considerations, plans to venture into service centre business in major towns such as Nairobi, Mombasa and Kisumu.

Also read: Kenya's 2022 top selling cars

The firm is also eyeing expansion across the region with a setup of operations earmarked for Rwanda and Ethiopia.

Other strategic priorities outlined included opening more branches across the country and the establishment of a modern driving school equipped with modern technology like simulators.

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