ABOUT 10 companies have launched pre-issuance processes to raise new capital from the capital market over the next nine months.
Investment banking sources at the weekend said improving macro-economic performance and increasing investors’ appetite for Nigerian equities may spur new issues in the months ahead.
Extant rules preclude issuers or capital raising companies, investment bankers and other parties to the issues from disclosing price-sensitive information such as new capital raising and earnings without prior approval by the regulatory authorities.
Sources in the know said not less than 10 companies plan to raise funds from the primary market over the next months. While the instrument, amount, timing and other details of the new issues are still sketchy. Most analysts expected companies to tilt towards debt capital raising and rights issue of equity.
Companies that were said to be considering raising new capital included May&Baker Nigeria, Fidson Healthcare, Red Star Express, Medview Airlines, Wema Bank, Jaiz Bank and Diamond Bank, among others. Already, MTN Nigeria, Dangote Cement and Africa Export and Import Bank (Afrexim) have confirmed plans to raise new capital.
Many second tier banks are also expected to raise new capital to improve on their capital adequacy level, said Sewa Wusu, Economist and Head, Investment Advisory at SCM Capital Markets.
MTN plans to reignite the primary market with an initial public offering (IPO) of some N153 billion. The much-awaited IPO will be the market’s first major IPO in a decade, after the 2008 capital market recession.
Sources close to the MTN issuance said the mobile telecommunication company may build in oversubscription clause into its offer, which will allow it to absorb more funds and issue above the IPO target in the event of oversubscription.
MTN Nigeria had in 2016 appointed the advisory team and set out a roadmap towards listing on the Nigerian Stock Exchange (NSE). MTN Nigeria board had announced the appointment of Stanbic IBTC Capital Limited and its affiliates, Standard Bank of South Africa Limited and Standard Advisory London Limited and Citigroup Global Markets Limited as the joint transaction advisors and joint global co-ordinators for the proposed listing on the NSE.
Red Star Express plans to raise new funds to finance its growth plan as the logistics company seeks to expand its businesses. Also, May & Baker Nigeria has stepped up preparations for its long-awaited new issue. Both Red Star Express and May & Baker Nigeria are expected to float rights issue. It should be recalled that shareholders had in 2014 empowered the board of May & Baker Nigeria to raise N3.2 billion new equity capital.
Dangote Cement has outlined plan to raise some N255 billion or $833 million in a multi-tranche debt issuance, that is likely to start this year. Dangote Cement-Nigeria’s largest quoted company, will issue a Naira-denominated bond to support its capital investments.
Afrexim plans to raise more than N61 billion from the Nigerian capital market and other two markets. Med-View Airlines and Jaiz Bank were said to be considering timing for their initial public offerings (IPO) as the two recently listed companies seek new equity funds to expand their operations.
GTI Capital Chief Operating Officer, Mr. Kehinde Hassan, said there could be more capital raising over the next months given the positive macro-economic condition.
He, however, noted that companies may opt for debt issue and rights issue than public offering, because of fear of under subscription.
Wusu said the improvement in macro-economic position and investors’ willingness to take up offers may spur companies to issue more shares, citing the funding gaps being experienced by many companies.
Total issuances at the Nigerian capital market stood at N1.55 trillion by the end of third quarter ended September 2017. Equities accounted for 12 per cent or about N186 billion.
“As the market is a barometer that gauges economic mood, we expect that stable economic output in 2018 will attract more companies to access funds from the market for capital injection. This will increase the market absorptive capacity,” Chief Executive Officer, Sofunix Investment and Communications, Mr. Sola Oni had told The Nation.
Managing Director, APT Securities & Funds Limited, Mallam Kasimu Kurfi, said the outlook for the primary market looks more promising this year as more companies may want to take advantage of current higher valuations at the secondary market.
“I foresee more companies raising funds from the capital market this year once the economy continues to grow,” Kurfi said.