Capital Markets

NSE graduates first firm from growth segment

nse

Securities trader Mbuthia Irungu at Nairobi Securities Exchange (NSE) trading floor at the Exchange building in Nairobi on August 26, 2020. PHOTO | SALATON NJAU | NMG

Nairobi Business Ventures (NBV) is set to become the first company at the Nairobi bourse to graduate from the Growth and Enterprise market Segment (GEMS) to the main investment segment following improved capitalisation and shareholder numbers after its reverse takeover by Delta International FZE last year.

NBV shareholders approved the change of listing, which is subject to regulatory approval, at their annual general meeting held virtually Thursday.

Dubai-based Delta initially acquired 84 percent stake in NBV at Sh83 million in 2020. Delta owner Haresh Soni and his associates subsequently increased this stake to 94.84 percent by taking an additional 857.6 million shares in the company in payment for NBV’s acquisition of four companies worth a total of Sh3.4 billion and which the partners controlled.

Firms listed on the NSE main investment segment normally face more stringent capital and accounting requirements and are also required to have a larger free float of shares and a larger pool of investors.

The entry of the new owners has seen NBV’s share capital hit Sh676.9 million as at March this year, while the number of shareholders stood at 1,150 by the end of July. Half of these shareholders hold below 1,000 shares in the firm, reflecting the speculative purchases by retail investors during the Delta takeover.

It means that the firm meets the key criteria for a main segment listing, where firms are required to have minimum paid up capital of at least Sh50 million, and at least 1,000 shareholders holding 25 percent of issued stock or more.

“It was…resolved by majority of the shareholders that subject to receipt of regulatory approvals, the company be listed on the main investment market segment and that the directors be and are hereby authorised to do all that is required and execute all the necessary documents and do all that appertains to ensure the listing of the company,” said NBV in its AGM resolutions.

The MIMS segment carries the bulk of listed firms at the bourse, accounting for 49 out of the 63 stocks in the market.

The Alterative Investments market Segment (AIMS), which slots in between the main segment and GEMS in terms of minimum capital requirements at Sh20 million, has nine counters while GEMS has five counters listed—which will now drop to four once NBV is moved to the main investment segment.

The GEMs segment was launched in January 2013, with Home Afrika becoming its first listing in July 2013. The expectation of the NSE was that the relative ease of listing on the segment would attract a higher number of companies to the market, which would thereafter provide a stream of main market listings down the road.

However, the expected stream of listings has largely failed to materialise, with the segment only attracting six listings in a decade. One of the GEMS firms, Atlas African Industries, was delisted from the bourse in April 2019 after falling into financial difficulties and shutting down operations.

The GEMS firms entered the market through introduction, meaning they suffered from limited liquidity due to shareholder numbers.

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