NBS Bank minority shareholders have called for transparency in the execution of the rights issue, threatening to take legal action should the bank continue to be silent on proceedings.
But the bank’s chairperson Vizenge Kumwenda, in an interview on Tuesday, called for minority shareholders’ patience, saying transaction advisers are working on the rights issue and will soon announce the timeline of events.
Through the rights issue—an issue of rights to a company’s existing shareholders that entitles them to buy additional shares directly from the company in proportion to their existing holdings, within a fixed time period—the listed bank is issuing three billion new shares and intends to raise K10 billion.
Representatives of the minority shareholders, Frank Harawa and Chandrakant Makadia, in an interview on Tuesday said they feel the bank is being unjust in the way it is handling the process of the rights issue.
“The bank has not communicated a thing since the first announcement of the rights issue. Looking at the calendar, pressure is still mounting on us on where we would get the money to buy the additional shares,” said Makadia.
The Malawi Stock Exchange (MSE)-listed bank plans to raise the money to meet the Reserve Bank of Malawi’s (RBM) deadline of April 29 for Base II capital adequacy requirement.
NBS bank was given a waiver by the RBM to meet the minimum capital requirement under Basel II, a directive that requires that banks’ Tier 1 capital and total capital ratio be at 10 percent and 15 percent, respectively.
The minority shareholders’ representatives fear most of them are not going to participate in the rights issue because there is not enough time to raise money to buy shares at once, hence, they will be diluted.
“As we speak the price of share is not yet known. Our concern is on how are going to raise money for these new shares within a month unless they tell us they have changed dates.
“We know our rights in regard to rights issue as minority shareholders and we have been engaging the bank so that they are not surprised with actions that we may take,” said Harawa.
But Kumwenda, without disclosing the timeline of the rights issue, said: “We know our shareholders and the public are eager to know what is happening, but let them be assured that they will soon be told all necessary steps.
“We are aware that there have been concerns from the minority shareholders that they would be diluted in the process. But we are encouraging them to buy the shares that they would be offered to avoid this [being diluted],” he said.
In NBS Bank, Nico Holdings Limited holds 50.1 percent stake, the public 26.2 percent, 18.1 percent is held by International Finance Corporation (IFC) while National Investment Trust Limited and employees hold 5.2 percent and 0.4 percent respectively. n