EYES ON U! After MTN listing, Stock Market looks to Airtel in 2022

New Airtel MD Manoj Murali

Uganda’s stock market saw a big leap in growth in 2021, thanks to the listing of MTN Uganda, after more than three years of near-stagnation with limited shares activity.

Over the year, the total value of the stocks of the locally listed companies, or the total market capitalization of the Ugandan stocks on the USE, grew to sh8.7 trillion from 4.27 trillion, boosted by the listing of MTN shares on the USE by June 2021.

Just before MTN went public, USE market capitalization had risen to 4.33 trillion as some shares on the stock market gained value, led by Stanbic Uganda Holdings Ltd and Bank of Baroda whose prices rose by 10per cent and 9 per cent respectively.

“In addition to the demand outstripping supply in the two stocks, there was also the stellar performance of Stanbic Uganda Holdings Limited and Bank of Baroda in 2020 despite the COVID-19 pandemic disruptions,” says Capital Markets Authority Chief Executive Keith Kalyegira about the period ended June 2021.

Following the MTN Initial Public Offer that raised sh536 billion, a total of 1.433 trillion Shillings has now been raised from the stock market in the last 10-years both through initial offers and secondary offerings. MTN’s IPO and a listing came almost four years after the previous offer, by Cipla Quality Chemicals Uganda Ltd in 2018, and was only the second since UMEME’s listing in 2012.

Kalyegira says that 500 billion Shillings in one IPO is proof that there is a lot of idle money in the public which investors could take advantage of instead of going for expensive commercial loans or personal savings. The CMA recognizes that the capital market has remained very small and the growth very slow due to a number of reasons, but mainly lack of knowledge.

“The limited supply of securities or few issuers can be attributed to several factors, such as a nascent private sector dominated by family-owned businesses, low level of awareness of market-based financing and a lack of investment readiness on the part of companies,” says the 2020/2021 Capital Markets Industry Report.

Going forward, the CMA says it has put in place several initiatives to ensure more companies embrace the market. These include the Issuer Resource Person Program which uses external contractors to reach out to key persons of prospective issuers like such as business owners, business founders, board members and chief executives, to sensitize them on access to long term capital through non-bank, market-based financing.

The other is the Deal Flow Facility launched in June, which aims at preparing and enhancing businesses’ access to long term market-based financing by amongst others, providing business support services. The pool of select enterprises will have access to business development support to increase their competitiveness and place them on an accelerated growth path, according to the plan.

The USE Chief Executive Officer, Paul Bwiso is hopeful that the new innovations that are leading to full digitization of the industry, will boost activity in the market. These include the online trading portal where a person can open and maintain a Securities Central Depository account online, which reduces the need for a broker.

This has also been boosted by MTN’s IPO which introduced the use of the mobile phone to open an account, apply for and acquire shares, which Mr Bwiso hopes can be rolled out to other IPOS in the future.

The launch of this platform increased the number of accounts almost 20 times to about 60,000, by the end of the IPO in one and a half months. The CMA says it is also working on policies to strengthen domestic institutional investor participation in the capital markets.

Despite a general increase in demand and pricing, domestic market capitalization, when measured as a percentage of GDP, fell from 3.4 per cent over one year to 3.3 per cent by June 2021 as GDP growth was faster than the domestic market capitalization growth. The total trading on the USE realised a turnover of 17.3 billion Sfillings in the period June 2020 to June 2021, showing a decline of 85 per cent from the previous 12 months when 115 billion was raised.

“The dip in market activity can be attributed to among other things, muted participation from both domestic investors and off-shore investors (who usually account for over 80 of turnover at the USE) due to the risk associated with the uncertainty generated by the Covid-19 pandemic,” says the report.

The listing of MTN Uganda moved the stock exchange closer to being categorized at a ‘Frontier Market’ on the Morgan Stanley Capital International (MSCI) index, which will make it easier to attract international investors.

At the MTN listing, Richard Byarugaba, then Acting Chairperson of the USE indicated that another big offering was in the pipeline, without disclosing further details as per the market’s governing rules.

It is anticipated that in 2022, Airtel Uganda will go public during the year as part of the conditions by the Uganda Communication Commission before granting a telecom company a National Operators License under the current guidelines.

“The licensee shall be required to list at least 20 per cent of its shares on the USE within two (2) years from the date of grant/ issuance of a license,” reads a close in the rules prescribed by the Uganda Capital Markets Authority. Airtel got its license in December 2020. The other company which got a license under this was Lycamobile in May this year.

Kinyara Sugar Works Ltd. is another proposed share offer that has been in the pipeline for 10 years now. In 2012, when the government was selling a 19 per cent stake in the company, it gave the majority owner, Rai Holdings five years to sell the shares to the public. Since then the offer has not materialized, with the ministry of finance saying it was disrupted by the global economic turbulence in the earlier part of the decade.

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