Fresh lessons from heavily oversubscribed IPO for NMB

The recent oversubscription of the National Microfinance Bank (NMB) Initial Public Offering (IPO) by 300 percent calls for immediate need for capital markets and securities policy reforms, an investment analyst has so argued.

As one of the East African economy`s largest IPOs, NMB late August drew heavy interest from locals, who snapped up the 48 billion shillings worth of shares -- or a 16 percent stake -- reserved for them by the government.

During the IPO or the first sale of NMB stock to the public, a total of 225bn/- was raised, almost five times more than the set target of 48bn/-, following government�s decision to sell its 21 percent stakes to the public, thus remaining with 30 percent. Five percent of the shares were retained for NMB`s workers.

This attention-grabbing trend, according to the Executive Director of Tanzania Investment Center (TIC) Emmanuel ole Naiko, calls for policy review on capital markets and securities so that extra liquidity lying idle in public hands is tapped into investments able to make the economy to grow and generate more jobs.

TIC boss was addressing an audience that gathered for the inauguration of the Banking, Insurance and Financial Institutions Fair.

``Refunding of money to people who had bought shares in the bank`s IPO was one of the most frustrating moment which the government in collaboration with the Stock Markets and Securities Authority (CMSA) should resolve to ensure increased absorption of public capital by viable companies and eventually get listed on the Dar es Salaam Stock Exchange (DSE)``, he said.

Something need to be done in the stock market since it has shown that Tanzanians are now ready to invest in shares as testified by the recent startling over-subscription of the NMB shares at IPO stages, he said.

These fresh calls for policy review have come at a time when preparations for establishment of a second tier market and possibly an over the counter (OTC) market are said to be in advanced stage.

Listing conditions in second tier are less rigorous, mostly taking into account emerging enterprises on the informal sector.

On its first day of trading at the bourse some two weeks ago, NMB shares soared to 900 shillings, from a sale price of 600 shillings, within 20 minutes of opening trade. It almost doubled by the close of the trading day.

Meanwhile, Lead Consultant and Director of the Coaching Culture Ltd Ms. Yvonne Chalmer said ongoing global economic slowdown and the measures requires individual nations as multilateral institutions to take calculated steps to minimise the adverse spillover effects of crisis.

She underlined the fact that collaborative leadership was essential for success in any business emphasizing that both small and medium enterprise needed to adopt such leadership.

In her view, collaborative leadership entailed a number of issues including assessing the environment for collaboration, creating shared vision, values and purpose, engaging people in positive action, building trust, creating safe places for action, sharing power and influence, and finally developing people as one of the key asset

At the national level, areas such as credit information system and easy use of commercial court system for quick debt recovery need special attention to enable financial institutions operate more efficiently.

For individual companies, she said: ``You need to form alliances or partnerships to strengthen your customer base, and watch your competitors while you struggled to improve collection of receivables from debtors``.

* SOURCE: Guardian