The Tanzania stockmarket is set for a second listing on its newly established growth and enterprise (GEM) segment this month.
Mwanza Community Bank (MCB) is selling five million shares at Tsh550 ($0.34) each through an initial public offering that concludes on October 31, two weeks after Maendeleo Bank’s that closes on Tuesday. Maendeleo targets to raise $2.5 million through the sale of eight million shares at $0.31 each.
Both IPOs, which will raise the number of locally listed firms on the Dar es Salaam Stock Exchange (DSE) to 13, are open to residents as well as non-residents. The two listings mark a departure from the past when Tanzania — through its tight capital account rules — treated regional investors as foreigners.
MCB’s founding members have already subscribed 600,000 shares for Tsh340 million ($211,752), or 12 per cent stake of the total shares on offer, leaving 4.4 million to investors.
“The offer is open to Tanzanian and non-Tanzanian persons,” said Joseph Kahungwa, MCB chairman, in the company prospectus.
The shares, whose proceeds will be used to capitalise MCB as a community bank so as to meet the requirements of the Bank of Tanzania, are expected to start trading on the DSE in mid-December.
MCB, whose licence was issued on March 1, 2012 and Maendeleo Bank, whose licence was issued on September 11, 2013, are startup institutions and do not have any track record of profitability.
MCB, whose nominated advisor is Arch Financial & Investment Advisory has projected losses for the first year of operations then profits for the next four years. Maendeleo Bank, on the other hand, whose nominated advisor is Core Securities, has projected losses for the first two years of operations then profits over the next two.
The two financial institutions will be joining DCB, CRDB and NMB banks, whose shares are already trading on the DSE, but on the main board.
The founders of the bank, whose directors include Stephen Kapongo, Abel Busalama, Nicholaus Wanna and Charles Malunde will not be allowed to sell their shares until 2016.
“All promoters who are institutional investors and the first directors of the bank will be locked-in for a period of three years,” read the prospectus of the offer.
The new bank expects to raise Tsh2.5 billion ($1.5 million) from the share offer, which will be used to acquire necessary technology and facilities, enhance investor and general public awareness and widen its ownership base.
The results of the offer are expected to be announced on November 15. Any oversubscribed shares will be allocated through a green shoe option, which allows the bank to issue more shares than offered.
Diamond Financial Services is MCB’s reporting accountants while K&M Advocates are its legal advisors.
To be allowed to list on the DSE’s new market segment, a company should be incorporated in Tanzania as a public company and have issued and paid up capital of at least Tsh200 million ($124,476). Also, at least 20 per cent of its shares must be publicly held and the firm must provide a detailed profile including a feasibility study and a five-year business plan.
Growth markets, which are now gaining popularity in the region, have less stringent listing rules and have been created to offer small and medium-sized companies an alternative platform for raising cheaper capital instead of relying on expensive debt, while offering owners an exit option.
The Nairobi Securities Exchange and the Uganda Securities Exchange are the other two bourses in the region that have established growth segments, while the Rwanda Stock Exchange in August indicated that it would soon launch a similar segment.
Real estate developer Home Afrika offered its shares in July on the NSE’s growth enterprise market segment (GEMS), launched at the beginning of the year, while the USE has yet to record any listing.