The establishment of the Growth Enterprise Market Segment (GEMS) will be the culmination of years of planning that is designed to accommodate SMEs at the stock market for the reason that they employ about 75 per cent of Kenyan workers.
The NSE chief executive, Mr. Peter Mwangi, revealed that three firms had already applied for listing on the GEMS board.
The financial advisory firm Burbidge Capital has already received NSE’s approval to act as consultant for small firms applying for listing on the GEMS board. The firm was of the opinion that there was immense interest among small firms that wish to use NSE as an alternative source of capital to traditional bank loans.
Vimal Parmar, head of research at Burbidge Capital said that they had been getting a lot of queries from firms, most of whom were interested in raising capital.
The firm is an authorised nominated advisor (Nomad) – a consultant for firms that want to be listed on the GEMS segment. Other licensed Nomads firms are Emerging Africa Capital, Standard and Mutual, and NIC Capital.
Mr. Parmar said that though a number of potential SMEs were interested in the platform, the first listing was likely to take place in the second quarter of the year as issuers would wait for the outcome of the General Election to implement their plans. There was a wait-and-see tendency as they waited for the elections.
Despite the pending elections, NSE has been on a bullish run. Mr Mwangi revealed that at least four other companies, including the stock exchange itself, intended to list on the main board this year.
The new market segment will give small firms a chance to grow by offering them flexible listing requirements such as the number of issued shares (100,000) and a minimum paid-up capital of KSh. 10 million.
Firms that were seeking to list on the alternative investment market segment (AIMS) were required to have a minimum capital base of KSh. 20 million while those that were applying for the main investment market segment (MIMS) were required to have a minimum paid-up capital of KSh. 100 million.
SMEs that exhibit high potential for growth need not show a proven profitability record but must still adhere to prudent management practices like having a board made up of qualified people.
One of the eligibility criteria for listing was that directors should not have had bankruptcy, fraud, criminal offence, or financial misconduct proceedings for two years.
Those firms who were seeking a listing on GEMS would also be required to have at least 35 per cent of their shareholding locally owned and 15 per cent free floating. A majority of the shareholders would also be forced into a two-year lock-in period.
Listing on GEMS will also give firms a window to unlock shareholder value while helping to reduce high financing costs related with traditional financiers such as banks, whose lending charges and collateral requirements often curb the growth potential of SMEs.
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