The Government yesterday launched the long-awaited Initial Public Offering (IPO) of Bralirwa Ltd, in a move that analysts said would draw firm investor interest and set the precedent for the future IPOs in Rwanda.

It is targeting to raise Rwf17.5 billion from 128,570,00 million shares as part of the government’s broader strategy to divest from companies it owns shares to facilitate the development of capital markets and to increase the alternative sources of long-term capital for business entities. The listing represents 25 percent of government’s shares in the company. 

Announcing the country’s first IPO, the Minister of Finance and Economic Planning, John Rwangombwa, said that government had earlier sold 5 percent of its percent shares in Bralirwa to Heineken International for $7.8 million or more than Rwf4.6 billion, which raises the total expected sale value to more than Rwf22.1 billion.

"This is for two reasons; one is to support the development of our capital markets. By selling the shares through the capital markets, we are helping to strengthen this capital markets to give it the capacity to know and trade in shares,

"With the government being the first key player in this market, we are really setting the pace for other investors to use the capital market as a source of long-term financing.”

The month-long offering will open today at the price of Rwf136 per share.

Rwangombwa said that in order encourage the investors to buy these shares and support the development of the secondary market, the government had to offer a discount of 20 percent.

He also announced that the minimum subscription is 100 shares with separate tranches for individual, institutional and foreign investors.

While 70 percent of the offer has been reserved for domestic investors, including the EAC, foreign investors were allocated 30 percent. From the domestic investors’ pool, 35 percent will go to retailer investors, 5 percent to employees and distributors of Bralirwa, 15 percent for institutional investors from Rwanda and 15 percent to EAC institutional investors. 

The minister said the proceeds from the privatisation will be put into government’s consolidated fund that forms part of the resources that are used to finance the annual national budget.

According to Sven-Erik Piederiet, Bralirwa’s Managing Director, Heineken Group supported the idea to go through the stock exchange not only because it has strong   confidence in the country, but also to support the government’s efforts to mobilise savings.

Piederiet said the board and management of the company sees the IPO as a unique opportunity to improve its image and gain more exposure.

"We believe this platform will even improve the image of Bralirwa much more which at the end of the day will be good for our company in generating new sales.”

In 2009, Bralirwa’s turnover was over Rwf71 billion including excise duties while net profit was Rwf6.3 billion.

In addition, over the years the company has recorded an average growth rate of almost 56 percent of net profit between 2007 and 2009.

Analysts speak out
The move will test the health of Rwanda’s IPO market and investor appetite for the stocks of the country’s largest brewery and soft drinks maker, which experts say is a blue-chip stock not only in Rwanda but also in the region.

"If you have a successful IPO, of which we think it will be, then it creates a great precedent for all the other companies and also encourages other companies to list.  It’s an opportunity to educate the masses, an opportunity for masses to get confidence in the market,” said Kenneth Kitariko, the Executive Director of African Alliance Rwanda, one of the transaction advisors. 

 Analysts also expect the share prices to go up on the secondary market though it will depend on demand and supply.

"Once they (investors) perceive that the company is doing well with sound financials, they come to the secondary market to buy and that’s when the bidding starts to take place and then it becomes a market issue. Bralirwa is a good company with sound financials, and in terms of preference from fund managers, the breweries are normally good buys,” Kitariko said

Samuel Njirwa, the General Manager of Dyer & Blair Uganda ltd, said that being the first IPO in the country, there’s a lot of investor interest both regionally and locally.

Following the launch of the IPO, Bralirwa will be listed on the on the Rwanda stock exchange OTC market on 31 January 2011.

Ends