Tuesday, September 4, 2012

Four banks plan IPO within fiscal year

KATHMANDU, SEP 4, 2012

The season of large initial public offerings (IPO) has begun with four commercial banks -- Civil Bank, Commerz and Trust Bank, Mega Bank Nepal and Century Commercial Bank -- set to issue Rs 3.02 billion worth of shares within the current fiscal year.

Commerz and Trust Bank on Monday signed a joint agreement with Citizen Investment Trust (CIT), Nabil Investment, Civil Capital Market and Growmore Merchant Banker making them its issue and sales manager for 6 million units of ordinary shares worth Rs 600 million.

These four institutions will also act as underwriter which means they will mop up any unsold stock. Commerz and Trust Bank plans to complete the IPO by the end of the third quarter of the current fiscal year.

Meanwhile, Civil Bank has appointed Citizen Investment Trust (CIT), Nabil Investment, NCM Merchant Bank and Ace Capital as the issue and sales manager for its public offering of 8 million units of shares worth Rs 800 million.

Century Commercial Bank is making an IPO worth Rs 920 million, the largest ever public offering by a private sector commercial bank. The bank plans to issue 9.2 million ordinary shares by fiscal 2012-13. As per its share structure, the promoters will hold 54 percent while the public will hold the rest. Likewise, Mega Bank has planned an IPO worth Rs 700 million for 7 million shares.

Although the public has not been very enthusiastic about investing in the capital market recently, a bevy of banks making IPOs reflects their confidence that there will be buyers.

"It is a company’s performance that motivates investors to purchase its stocks," said Anal Bhattarai, CEO of Commerz and Trust. "Our balance sheet has portrayed a gradual and sustainable growth which will definitely lure investors."

Capital market experts, however, said that investors first look at the overall secondary market before making investment decisions. "Then only will they evaluate the performance of a company," said Rabindra Bhattarai, stock analyst. "The situation in the capital market is not very ideal at present. So all the shares on offer may not be bought."

Bankers, however, said that commercial banks had shown good performance during the last fiscal year with a majority of them registering good profits, and that it would entice investors to invest in the shares of commercial banks. "Also, the capital market is not as bad as it was a year ago, and it has been recovering constantly," said Ganesh Kumar Shrestha, CEO of Century Commercial Bank. "So, there is a high possibility that the public offerings by the commercial banks will be fully subscribed."  

Nevertheless, excess liquidity in the financial system and record low returns from the money market are likely to benefit the planned IPOs. "The interest rates offered by banks and financial institutions are declining at a rapid pace and have fallen below the inflation rate," said Bhattarai. "Generally, in such a situation, money flows to the capital market with two motives -- long-term investment and short-term speculative investment."

Last April, the IPO of Janata Bank Nepal had received an overwhelming response from the public and it was over-subscribed three-fold. The bank issued 6 million ordinary shares worth Rs 600 million. Currently, its shares are trading at around Rs 130. "For those who purchased Janata Bank shares, the value of their investment appreciated by 30 percent within four months, which is a very good return," said Bhattarai.

Source: The Kathmandu Post

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