More IPOs to flood market

KATHMANDU, SEP 17: 

The primary market seems to have warmed up right from the beginning of the fiscal year inspired by the secondary market’s rally.

In the first two months of fiscal year 2012-13, four financial institutions have got approval from capital market regulator –– Securities Board of Nepal (Sebon) –– to issue shares worth Rs 150 million to the public.

Last year, by the third quarter, Sebon had approved Initial Public Offerings (IPO) of only six companies which was worth Rs 181 million. Last year, issuers were wary about the reception of their IPOs by investors. Thus, the number of public offerings had remained small in the first three quarters of the fiscal year. The secondary market was in the doldrums and issuers were apprehensive.

However, after going through a surge in mid-April, 2012, primary market along with the stock market also received a shot in the arm. By the end of last fiscal year, the primary market saw IPO approval of 15 financial institutions worth Rs 1.3 billion of which nine had initiated the process in the last three months. 

Bright Development Bank, which was given a go-ahead by the regulator in July 19, has already published the offer document. 

“Though the number of IPO registration has gone up lately, the reception from the public is not very warm,” said president of Merchant Bankers Association of Nepal Bhisma Raj Chalise. “Lately, IPOs of smaller development banks and finance companies did not fare well and underwriters had to buy the shares,” he added. 

He attributed the tough stance of the central bank and financial institutions on loans floated for share purchase that has contracted the capital with general investors to buy shares in IPO, as the reasons for the public offerings being difficult to get subscribed. 

Four commercial banks are gearing up for IPOs this year. Commerz and Trust Bank has appointed Citizen Investment Trust (CIT), Nabil Investment, Civil Capital Market, and Growmore Merchant Banker as its issue manager for its IPO worth Rs 600 million. 

Civil Bank has appointed CIT, Nabil Investment, NCM Merchant Bank and Ace Capital as the issue manager for its offering worth Rs 800 million. Century Commercial Bank and Mega Bank will also come up with public offerings before the end of current fiscal. Janata Bank was the last commercial bank to issue shares to the public and its issue was oversubscribed by more than three times.