Kenya's Landmark $824 Million IPO: State Firm Returns After Decade

After more than a decade without a major state-backed equity sale, Kenya is poised for a landmark market revival as the debt-hit country plans to raise a record 106.3 shillings ($824.1 million) from an initial public offering of a state-run pipeline company, Bloomberg reported. President William Ruto’s government will sell 11.8 billion shares, or a 65% stake in Kenya Pipeline Co., at an offer price of KES 9 (f$0.070) per share. The sale would value the company at 163.6 billion shillings ($1.27 billion), making KPC the fifth-largest company on the Nairobi Securities Exchange (NSE). Kenya Pipeline Company plays a key role in Kenya’s energy system, operating a wide network of pipelines that transport petroleum products from the Port of Mombasa to major consumption centres across Kenya and into the wider East African region, local media reported. The company enjoys a near-monopoly in fuel transportation, underpinning national energy security and supporting fuel trade with neighbouring countries. Proceeds from the IPO to be used for infrastructure Kenya’s first IPO since 2015 is expected to help the country raise money for infrastructure at a time when it is heavily in debt. The move comes as the local stock market has been performing strongly, with the benchmark stock index jumping 51% in local-currency terms last year, its biggest rise since the measure was created in 2008. Kenya Pipeline’s pre-tax profit gained 65% in the financial year through June to 16.5 billion shillings. It has a network of 1,342 kilometres (834 miles) and is capable of transporting about 14 billion litres (3.7 billion gallons) of petroleum products a year, according to the company’s website. Details of the IPO The IPO opened on Monday, 19 January, for subscription and closes on 19 February, positioning itself as the biggest public offering since Safaricom Plc raised 50 billion shillings in 2008, Bloomberg reported. “After more than a decade, it is an important milestone in the renewal of Kenya’s primary exchange and a strong signal of renewed confidence in the role of capital markets in financing our nation’s economic transformation,” Nairobi Securities Exchange Chief Executive Officer Frank Mwiti told the news agency. Kenya's economic health Kenya has limited capacity to take on more loans as the country's debt has already risen to a record 72% of gross domestic product (GDP) in 2023; hence, the government is now looking to raise funds for capital projects through privatisation and securitisation of state-owned assets. President Ruto has revealed that Kenya needs at least 5 trillion shillings to lift the nation into a developed economy. Apart from KPC, dozens of other state-owned companies are also lined up for privatisation, including National Oil Corp and New Kenya Co-operative Creameries Ltd, according to Bloomberg. Expert anticipates an ‘oversubscription’ The IPO has been witnessing high investor interest, due to which experts “anticipate an oversubscription,” said Belgrad Kenne, lead for the sale at Faida Investment Bank. He additionally noted that the timing of KPC's IPO may play a significant role in its success, as the nation is currently witnessing a favourable macroeconomic environment. “If you look at the fixed-income segment, yields have come down significantly. What that means in terms of reallocation is actually seeing portfolio managers moving from those low yields, looking for high returns. And you know the NSE has been on steroids,” Kenne told Bloomberg.