Smoothing the way for IPOs

Safeya Mounir , Sunday 17 Oct 2021

This month’s e-Finance share offer will ease the resumption of Egypt’s initial public offers programme, financial experts tell Al-Ahram Weekly.

Smoothing the way for IPOs

Subscription to the state-owned e-Finance Company’s initial public offering (IPO) comprising 1.6 per cent of shares started on 10 October, amid indications that the fintech platform and payments infrastructure company had garnered unprecedented success on the first day of the offering. The subscription runs through 17 October.

Meanwhile, the company’s private placement, representing 14.5 per cent of its total shares and targeting financial institutions in several markets, including Egypt, ran from 6 to 11 October. The results have yet to be disclosed.

The company said it was offering to sell 257.8 million shares, or 16.1 per cent of the total, to the public, including 177.8 million new shares and 80 million shares owned by current shareholders, at a price range of between LE12.5 and LE13.8.

Ninety per cent of the offering is slated for the private placement, while the remaining 10 per cent is set aside for the local stock market.

The company’s shareholders include three state-owned banks, the National Investment Bank, with 63.64 per cent of the shares, and the National Bank of Egypt and Banque Misr, each with 9.09 per cent. The Egyptian Banks Company, a payments operator led by the Central Bank of Egypt (CBE) and the Egyptian Company for Investment Projects, each own another 9.09 per cent of the shares, according to Reuters.

Trading in the company’s shares is supposed to start on 20 October.

The e-Finance IPO is meant to boost the financial market, increase trading on the Egyptian Stock Exchange, and attract investors, according to analysts. The proceeds of the offering will be employed in financing expansion plans, part of the company’s growth strategy.

According to Ibrahim Sarhan, chairman and managing director of e-Finance, the proceeds will be used to seize opportunities in the field of digital transactions, with the help of the latest technologies in services and innovative solutions to maximise the benefit for all parties involved, including government bodies, the business community, companies, and customers.

The company will capitalise on the modernisation of its organisational structure, integrated strategic vision, and expanded operational capabilities.
e-Finance is a strategic partner of the government, particularly the Finance Ministry, when it comes to electronic payments for national projects.

In cooperation with other companies, it has been engaged in a public pilot project for e-invoices. The project targets greater control over the informal economic sector and integrating it into the formal economy to achieve a fairer tax system and better regulation of the national economy.

The e-invoice system is part of the Ministry of Finance’s e-billing system. Raising the efficiency of the tax system, combating tax evasion, and collecting state dues for the good of the national economy are some of the targets of the project.

e-Finance has also been engaged in several government projects to accelerate digital transformation and boost governance.

Abanob Magdi, vice president of research for the banking and financial institutions sector at Beltone, an investment bank, said that e-Finance was the only company in Egypt that systemises e-payments for government projects. The size of its operations amounts to more than LE2 trillion, while competitor Fawry’s operations are estimated at LE80 billion.

Magdi said that the payments sector in Egypt was witnessing significant growth, explaining that the e-Finance IPO had seen a large turnout and the entry of new investors into the market. He said that the price offered per share “is very appropriate, even less than its fair value.”

Mina Rafik, head of research at Al-Marwa, agreed, adding that the offered price was 39-fold the price-earnings ratio.

Rafik said the offering would appeal to foreign institutions due to the large portion slated for institutional investors through the private placement as compared to the meagre share targeting retail investors.

The Stock Exchange listing committee agreed on 4 October to list e-Finance as a communications, media, and information-technology company. It stipulated that the company complete the offering process within a month of registration with the supervisory authority. If not, its registration will be considered void unless the committee decides to extend the period.

Rafik said that now was not the best time to be offering shares, adding that trading had regressed by LE800-LE900 million on a daily basis. Trading had earlier recorded about LE2 billion per day, he said.

He commended the decision to resume the IPOs programme, especially since the value of the market capital, estimated at LE700 billion, represents 10 per cent of GDP. He added that the market needs larger IPOs to increase market value and consequently raise Egypt’s standing in global indicators, such as that of the US bank Morgan Stanley.

He said the e-Finance IPOs would reflect positively on the Egyptian Exchange and give a boost to the flexible resumption of the IPOs programme.
Magdi concurred, saying that an IPO for Misr Life Insurance in the second half of the current fiscal year had recently been announced and that IPOs for Banque du Caire and shares in the Bank of Alexandria were in the pipeline.

*A version of this article appears in print in the 14 October, 2021 edition of Al-Ahram Weekly

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