KCB Group’s latest attempt to raise $188 million from all its shareholders is meant to shore up its regional expansion programme from which the Rwandan operations is set to receive Rwf 3.8 billion, a top official has said.
Maurice Toroitich the Managing Director of KCB Rwanda told Business Times, that for the third time in six years KCB is set to raise additional cash from its roaster of shareholders to boost its business across its sites in East Africa.
KCB Rwanda, with nine branches, is part of the group’s diverse network spaning East Africa with a total of 211 branches. According to an information memorandum for the rights issue, a copy which was availed to Business Times, KCB is seeking $188 million from its shareholders, a tactical move which has been described as ambitious but well timed.
A rights issue is an option that a company can opt for to raise capital under a secondary market offering or seasoned equity offering of shares to raise money. It is a special form of shelf offering or shelf registration.
If the amount is raised, the statement states that KCB will able to potentially take in $2.3 billion in new deposits while lending out $1.5 billion. With the Rwf 3.8 billion capital injection, KCB Rwanda will create additional capacity to raise additional customer deposits of up to Rwf 30 billion.
“The shares are going to be available firstly on the Nairobi Stock Exchange which is the primary bourse. Thereafter there will be cross listing. So it is an issue of demand and supply over the other bourses in the markets outside of Nairobi”, Toroitich said.
The KCB Rwanda boss added that the process of the ‘rights issue’ entailed shareholders to be contacted through direct mail by being given provisional letters of allotment.
“The assumption is that, as current shareholders … they are entitled to these rights”, Toroitich added.
The roaster of KCB shareholders as at the closing date of the rights issue, from Rwandan investors, had 36 individual shareholders. In this latest cash raising venture, KCB is giving a set of two rights for each five shares held.
However KCB says that shareholders have an option to turn down the offer. Part of the option entails the shareholders being able to sell these rights for money value.
From the 1st of July the rights will be tradable from the regional bourses and it will close on July 23. Allotment and announcement of the offer results will be on the 5th of August. KCB is optimistic that this new form of raising capital for businesses, will spur trading activity at the Rwandan bourse.
“This new move should be able to boost the workings of the Rwandan OTC as trading of shares in a new phenomenon in Rwanda. So we expect a response from investment savvy individuals and institutions”, Toroitich said.
KCB further says that the rights issue is part of its contribution for deepening the workings of the Rwandan bourse.
KCB Rwanda will utilise the additional capital to recapitalise operations following losses in its first year of operations. The funds will be utilized to support local market share growth in customer deposits and loans as well as making investment in new banking technology,