24/11/2015 07:54 AST
Omani companies that were planning to come out with initial public offerings are shying away from the primary market mainly due to a fall in valuations and macro-economic concerns.
Several firms have announced their intention to float shares on the Muscat Securities Market (MSM) in the last one year, but these companies are now thinking of entering the primary market only next year, once the oil prices bounce back.
“The capital market is not conducive for raising capital, mainly due to a fall in market valuations and macro-economic concerns,” said Kanaga Sundar, head of research at Gulf Baader Capital Markets. “However, the debt market is still active due to government borrowings,” added Sundar.
Several firms were ready with initial public offerings in December last year. However, since oil prices started falling, these firms thought that they may not be able to get the price multiple they were looking for, added another market analyst, who does not want to be named.
The Muscat Securities Market general index, MSM 30 Index, the barometer of the market trend – declined by 9.2 per cent to close at 5,762.11 on Monday, compared to the beginning of the year.
The private sector firms that were planning to mobilise funds from investing public include Falcon Insurance, a subsidiary of Al Anwar Holding, and TruckOman, part of Al Yousef Group. The insurance regulator, Capital Market Authority, last year asked national insurance companies to go public within three years (in line with an amendment in the Insurance Companies Law) and that was one of the reasons for Falcon’s proposed share offer. Falcon has to raise its paid up capital to OMR10 million, in line with the CMA stipulation on minimum capital. As many as eight locally incorporated insurance companies, including a reinsurance firm, will offer shares to investing public within three years to comply with the recent amendments in the insurance law.
Market analysts said that the companies might come out with their primary offers next year, when the oil recovers to $60-70 per barrel-level as many rating agencies have expressed hope in oil price recovery next year.
Oman government was also planning to divest its stake in several state-owned firms, including subsidiaries of Oman Oil Company, in an apparent move to sur stock market trading and to raise funds to cover budget deficit.
However, except Oman Telecommunications Company’s (Omantel) share offer last year, no other primary offer was floated by the government.
In fact, only one company — Phoenix Power Co — raised funds from investing public since the beginning of this year. The share was oversubscribed to the tune of 18 times, mopping up almost OMR1 billion bids from investors against an issue size of OMR56.3 million. The issue was a major success due to the fact that it was offered at par value (without a premium) and dividend payout of power producers is better.
Times of Oman
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