Feb 19 2007 |
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Oman: Floating too many initial public offerings is not in the interest of the investors
Better activity expected in IPOs and bond issues, says CMA chiefMUSCAT -- Sultanate's primary market is likely to witness better activity in initial public offerings (IPOs) and bond issues. A couple of companies are planning initial public offerings, while hire purchase and leasing firms are set to issue convertible bonds to comply with the regulatory requirements on enhancing the capital base. "Two leasing companies have approached us to float convertible bonds," Yahya bin Said al Jabri, Executive President of the CMA said, on the sidelines of a forum on Integration of Arab Capital Markets: Prospects and Challenges. "This is to meet central bank's stipulation to raise minimum capital to RO 10 million by June 2009," he added.
The CBO last year asked leasing and hire purchase companies to raise minimum capital to RO 10 million from RO 5 million within a period of three years, in an apparent move to strengthen the financial services sector to meet the growing demand for lease funds. Except United Finance, all other leasing companies will have to raise their capital. Al Jabri said the leasing firms are planning convertible bonds in such a way to enhance capital base to the stipulated level by 2009.
Al Omaniya Financial Services, the second largest financial services firm in the Sultanate, said it was planning to float convertible bond issue of RO 8 million on a rights basis. The 2-year-bond with a face value of RO 1 will carry an annual coupon rate of 7.5 per cent. Oman's leading construction firm Galfar Engineering & Contracting, and Takamul , an investment company under formation, are planning to float initial public offerings sometime this year. Although Galfar IPO is not yet finalised, sources indicated that it would be in the region of RO 60 million. Takamul 's share offer will be around RO 20 million.
A few more firms are planning to float right issues, which is expected to enhance the depth and market capitalisation, Al Jabri noted, without naming those companies. As there was hardly any IPO last year, there was an overwhelming demand for Bank Sohar's share offer. The IPO raised around RO 123 million, indicating a subscription of six times of the issue amount. The newly-formed bank offered 40 million shares (worth RO 20 million) at a price of 520 baisa per share, which included an issue expense of 20 baisa.
"But floating too many IPOs is not in the interest of the investors," he said, pointing to the subscribing shares on borrowed funds in some of the neighbouring markets in the recent past. Like other GCC markets, Al Jabri said, the trading activity in debt market in the country has been limited. "In the last couple of years, the government did not raise money from the domestic market," he said, adding; "The government does not need borrowed funds due to high oil income."
© Oman Daily Observer 2007
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