IPO lines up. Seven BFIs gear up for IPOs

The domestic capital market will be witnessing another round of initial public offering (IPO)s, with seven banks and financial institutions (BFIs) gearing up for the fund raising. However, amid bearish stock market and investors’ confidence reaching lower ebb, success of the IPOs is uncertain. This is the first time in seven months that BFIs are issuing IPOs after Bhargav Bikas Bank. Bagmati Development Bank and Manjushree Financial Institution recently received approval from the Securities Board of Nepal (Sebon) for IPO issuance. Bagmati has been approved to issue ordinary shares worth Rs 40 million, while Manjushree will issue those worth Rs 23.5 million. Other five— Janata Bank Nepal, Kanchan Development Bank, Nepal Consumer Development Bank, Summit Micro Finance Development Bank and Lotus Investment Finance— are awaiting the regulator’s approval. Sebon officials said they will be granted the approval within the next month. These BFIs, excluding Lotus, will be raising Rs 731.30 million. Given the huge amount, stock market experts are doubtful whether the public will subscribe all the shares. Their scepticism is valid as even established banks failed to get all of their rights shares subscribed in the recent past. Analyst Rabindra Bhattarai said a majority of financial institutions will struggle to get all of their shares subscribed and it is most likely that a large portion of their shares will be kept by underwriters. An underwriter is a company or other entity that guarantees the purchase of a full issue of stocks. It buys shares from the issuer and sells them to investors via its distribution network. “Slowdown in secondary market affects the primary,” said Bhattarai “Investors confidence is very low at the moment.” Similar is the view of stockbroker Nanda Kishore Mundara. Public may subscribe commercial banks’ shares, but development banks and finance companies will struggle, he said. Public confidence in development banks and finance companies has dropped significantly after some of them landed in trouble a few months ago. However, Janata Bank CEO Bajay Pant is confident about the full subscription of the shares. “Commercial banks are still the first choice of investors, as it is the most transparent industry with good corporate governance,” he said. “Also, their share prices have rarely gone below the face value.” Upcoming IPOs BFIs Value Bagmati Development Bank Rs 23.50 million Manjushree Financial Institution Rs 40 million Janata Bank Nepal Rs 600 million Nepal Consumer Development Bank Rs 60 million Summit Micro Finance Development Bank Rs 7.50 million Kanchan Development Bank Rs 300,000 Lotus Investment Finance — NA Total Rs 731.30 million Source: Kantipur