Kenyan-owned IT firm Empire Microsystem is set to go public by floating its shares on the Growth Enterprise Market Segment (GEMS) of the Nairobi Securities Exchange (NSE) mid this month, joining a growing list of small and medium-sized enterprises that have done so.
The firm says the move will help it earn the confidence of strategic investors keen to inject millions into the implementation of mega IT projects in the country.
“We are listing so that investors can see value in us,” managing director James Mworia told The EastAfrican.
The GEMS board, which was introduced by the NSE last year, gives firms which do not qualify to list on the bourse’s main board an alternative trading platform. It allows SMEs to bolster their capital reserves, enhance price discovery and improve brand visibility.
The concept, which has been embraced by some of the counterpart securities exchanges within the East Africa Community, is also being viewed as an integral aspect of the planned integration of the regional capital markets.
Tanzania has an SME market segment dubbed the Enterprise Growth Market Segment (EGMS), which has two listings while Uganda is reviewing the rules and regulations for its Growth Enterprise Market Segment.
According to NSE acting chief executive Andrew Wachira, there is an overwhelming interest for firms to list on the SMEs’ market segment mainly because it provides an affordable avenue for listing on the bourse in comparison to the Main Investment Market Segment (MIMS) and the Alternate Investment Market Segment (AIMS).
“A firm listing on this segment is not required to provide any profitability record,” he said.
Listing on GEMS offers a shorter listing process by way of introduction, it requires capital of $111,111 with not less than 100,000 shares in issue to the public, providing the firm with easier access to public equity and debt capital while allowing them to enjoy lower fees.
NSE in partnership with the Nominated Advisors has carried out marketing and awareness campaigns to the target audience, since the launch of the segment.
“The listings are as a result of continuous engagement and education on the benefits of this market,” said Mr Wachira.
So far three firms have listed on the NSE GEMS market: Real estate firm Home Afrika Ltd, which listed on July 15, 2013; manufacturing firm Flame Tree Group (November 6) and Sharia-compliant investment vehicle Kurwitu Ventures Ltd (November 13).
In addition, a number of companies have shown interest in listing on GEMS including Atlas Development, Empire Microsystems and East Africa Data Handlers.
“Listing on GEMS enables medium tier firms to bolster their capital Base, facilitating their development strategies, in turn promoting the growth of our capital markets,” said Mr Wachira.
Empire, which was incorporated in 2007, has already secured lucrative outsourcing of telecommunications services deals with major telcos including Safaricom, Wananchi Group, Huawei and Jamii telecom.
While large firms lay the cables, Empire Microsystems is contracted to negotiate with landlords and carry out door-to-door connections, maintenance and support.
Linking Internet service providers to their customers is Empire’s core business but the firm says it intends to go big in the IT sector by initiating more projects around digital centres, arguing that the data “tsunami” is in the offing.
“We want to transform this company from being just a mere business entity to a business platform that will give investors, both local and international, an opportunity to invest,” Mr Mworia said but declined to divulge more details on the amount of shares on offer and its pricing, saying the move could jeopardise the transaction that is yet to receive regulatory approvals.
“We are yet to receive the requisite approvals. Our proposal is still pending at NSE,” he said, noting that putting Empire which has five board members on the NSE would also help improve its brand visibility provide investors with an elaborate exit mechanism.
Mr Wachira said a team has been constituted to ensure that the approval for the listing is granted within 2-3 weeks when submissions are fully complete.
“We expect the turnaround time for approvals to reduce drastically because we now have a team. But this is dependent on how complete the submissions by the potential issuers are,” said Mr Wachira.
Listing on the NSE is part of Empire’s five-year (2015-2019) restructuring and transformation strategy through which it seeks to attain an annual turnover of $11 million compared with a turnover of $555,555 last year.
“In 2014 we started a restructuring and transformational process that will ensure that Empire becomes a more serious institution with its own structures and processes. Our business is dependent on people and we needed Empire to be ready for the future,” said Mr Mworia.