1. Capital Markets Presentation for Listing and IPO

2. The Capital Market Authority, as a matter of policy, disclaims responsibility for any private publication or statement by any of its employees or agents. The Capital Markets Authority takes no responsibility for any consequences arising from decisions taken on the basis of the contents of this presentation. For more information or clarification, please refer to our regulations on the same which are available at our website:

3. Benefits of Raising Capital Through Listing
PRESENTATION OUTLINE
Market Performance
Equity Financing
Debt Financing
Benefits of Raising Capital Through Listing
Factors to Consider in Raising Capital
Why the Capital Markets
The Listing Process and experience
Key Considerations for Public Offer/Rights Issue
Bonds and Commercial Paper

4. State of Kenyan Capital Markets Performance as at Dec 2016
The Nairobi Securities Exchange 20 share index as at December stood at 3,186 points down from 4,175 index point in January Market performance was therefore relatively lower, this can be attributed to the interest rate capping among other macroeconomic factors
As at December 2016 the annual Bond turnover was billion compared to December 2015 where the annual bond turnover was billion. Annual bond turnover in 2014 was billion.
As at 2016 equity turnover was billion compared to December when it stood at Kshs billion. Annual equity turnover in was  billion.

5. NSE 20 trend

6. Bond and Equity Turnover Trends

7. Bond and Equity Turnover Trends

8. Equity financing

9. Equity Financing Advantages Disadvantages Dividend ( not mandatory)
Goals of investors are fully aligned with founders:
– Company success
– Capital gains
Large volume available
Long time horizon
Capital Gains Tax
Cheap publicity
Corporate Governance
Liquidity
Advantages
Loss of ownership; eventual loss of control.
Founder now reports to Board of Directors; this is an emotional issue for many founders.
Focus on exit strategy: Equity investors expect sale, merger, or IPO
Disadvantages

10. Debt financing

11. Advantages Disadvantages Debt financing Other people’s money!
No loss of ownership.
Term limit
Tax shield advantage
Advantages
Debt service:
Lenders want a little bit back every month.
Often a bad match for startup’s cash flow.
Only willing to lend when you don’t need it!
Lenders care about repayment, not about the success of your business.
Disadvantages

12. Benefits of raising capital through Listing
Raising cheap long term capital
Separation of ownership and management
Succession planning & growth
Enjoy Public support and accessibility
Daily and free publicity
Corporate Governance

13. Factors to Consider in Raising Capital
Market awareness
Brand recognition
Sound structuring of instrument (if debt issue)
Credit Rating and Guarantees / Collateral
Timing of going to market / Pricing
Choice of entity
Strong balance sheet
Promising future revenue projections
Financial advisory team - disclosures and investor protection mechanisms

14. Why the Capital Markets
Separation between owners and managers
Enhances Corporate image/governance
Structured financing
Can determine the features of the money raised
Long term financing available
Tax allowances & exemptions

15. Did you Know? USD 34 billion Last 10 years
Over USD 5.7 billion in the last 6 years
Eurobond 500% subscription
USD 34 billion
Last 10 years
JOH-KYA JvW-P1

16. Performance by market capitalization

17. Equity Turnover as at December 2016

18. NSE Listing Segments and Requirements Snapshot

19. NSE Listing Segments and Requirements

20. Listing Process Action by Issuer Offer Preparation Placement & Closure
Issuer Board Approval
AGM for Shareholders’ Approval
Due diligence-legal, financial
Equity valuation and share price calculation
Prepare Offer Documents
Information Memorandum (IM)
Provisional Allotment Letters (PALs)
PR and Roadshows
Launch & Offer Opening Period
Closure of offer & Receipt of funds
Processing & allotment
Announcement of result & refunds
Listing on NSE

21. The Listing Experience

22. Key Considerations for a Public Offer/Rights Issue
The public or rights offer has to be approved by the shareholders
The 6-month volume weighted average share price for Rights Issue with discount
Equity valuation that reflects a value that fundamentals can support
The transaction will be subject to regulatory requirements by Industry Regulator, CMA, and NSE
It is important to consider timing the market when there are few competing issues and when liquidity is high
Shareholders Approval
Price Determinants
Regulatory Considerations
Timing for the Issue

23. Eligibility criteria for a bond or commercial paper issue (CMA guidelines)
Min issued & paid up Ksh 50 million
Ksh100 million before listing
Audited financial statements for the financial year (where proposed date of offer is less than 3 months to the financial year end).
Interim financial statements for at least 6 months (where < 9 months have elapsed)
IFRS/ IAS compliant financial statements
At least one third of the Board of Directors should be independent
Issuer must have declared positive net profit for at least 2 of the last 3 financial results
At least Ksh 50 million
Total Debt/Net Asset ≤ 400%
Funds from Operations/Total Debt ≥ 40%
Where the issuer does not meet the criteria, they must involve a guarantor
Share Capital
Net Assets
Availability and reliability of financial records
Directors independence
Profitable historical track record
Size of Issue
Debt ratios
Guarantee requirements

24. Corporate Bond Programme
Action by Issuer
Offer Preparation
Placement & Closure
Issuer Board Approval
Due diligence-legal, financial
Prepare Offer Documents
Information Memorandum (IM)
Pricing Supplement
Application forms
CMA & NSE Approvals of offer documents
Printing & distribution of IM
PR and Roadshows
Launch & Offer Opening Period
Closure of offer processing & allotment
Announcement of result & Settlement (Receipt of funds)
Listing on NSE