DTB rights issue oversubscribed by 86pc

By James Anyanzwa

Diamond Trust Bank’s (DTB) rights issue has been oversubscribed by 86 per cent with analysts viewing the outcome as a turning point for the struggling equity market.

According to the results of the issue released by the DTB board on Friday, applications for new shares hit Sh3.36 billion against a target of Sh1.8 billion.

The bank planned to raise Sh1.8 billion by offering   24.45 million additional shares to the existing shareholders in the ratio of one share for every eight held (1:8) at a price of Sh74 per share.

But the shareholders applied for a total number of 45.53 million additional shares.

 “We are excited for having delivered the first oversubscription after a long time.

We believe we have now reached a turning pointer in our equity market this year. This is a good pointer to the future equity capital as a source for funding,” said Amish Gupta, director in charge of investment banking at the Standard Investment Bank (SIB) Ltd, the joint lead transaction advisors and sponsoring stockbrokers together with Kestrel Capital Ltd.

Gupta noted that the country’s current macroeconomic environment characterised by stable shilling exchange rate, falling inflation and declining interest rates is working in favour of rights issues.

The proceeds of DTB’s rights issue will be used to fund the bank’s strategic expansion plan.

 The bank has in the last few years increased its investments in the group’s subsidiaries in Tanzania, Uganda, and Burundi as well as expanded its branch footprint in Kenya.

“The right issue price was attractive and the secondary market price has continued to exhibit wider margin visa-vis rights issue price,” said Gupta.

DTB rights issue represented a 27.5 per cent discount against the bank’s prevailing market price.

The new shares will start trading on the Nairobi Securities Exchange (NSE) on September 12.

The bank whose pre-tax profit for last year rose 24 per cent to Sh4.3 billion, up from the previous year’s Sh3.5 billion is betting on regional expansion initiatives to consolidate its market share in the small and retail banking and bolster its bottomline.

The additional capital is aimed at funding the bank’s plans to explore opportunities to further strengthen its current presence in East Africa through its subsidiary banks, as well as explore investment opportunities in other markets in the region over the medium term.