Slow pick up time for capital calls

Thursday, 1 December 2011 00:00 -     - {{hitsCtrl.values.hits}}

  • BOC’S Rs. 5 b debenture issue thru' Rs. 2 b mark by opening day
  • Asia Asset Finance’ Rs. 425.4 m IPO garners 31% so far

Uncertainty and confidence issues in capital markets appear to have depressed appetite for two fund raisers, though issuers expressed optimism that the response is thus far encouraging given the challenging environment.

The Bank of Ceylon (BOC) Rs. 5 billion debenture issue, which officially opened Tuesday, had drawn Rs. 2.07 billion via 43 applications whilst Asia Asset Finance’s Rs. 425.4 million IPO began on Monday had passed the 30% threshold by Tuesday.

During bull runs, new issues big or small were usually snapped up within hours of opening or prior, but some analysts welcomed the sedate response as a sign of a market that is consolidating.

Bank of Ceylon Deputy General Manager P.A. Lionel said he expected the issue to be oversubscribed in two to three days’ time. He described the response as of Tuesday to the issue as being very good.

State giant BOC is offering 50 million Unsecured Redeemable Debentures at Rs. 100 each.

On the other hand, Asia Asset Finance is issuing 120 million shares at Rs. 2.50 each with an option to accept a further 50,160,129 Ordinary Voting Shares.

The Company’s Chairman Daya Muthukumarana and CEO Rajiv Gunawardane in a joint statement said yesterday: “Whilst the result possibly indicates a change in market conditions, we find it unfortunate that a well-managed and well-performing company such as AAFL had to go in for an IPO based on regulatory requirements – even when market conditions are at an all-time low.”

Asia Asset Finance added that the IPO performance did not in any way reflect the performance of the company as a whole, as its performance over the past year had been exemplary and the past six months performance for the current year had further justified the growth of the company.

“Negative sentiments on the stock market and declining market conditions are the principle reasons for the IPO to not be oversubscribed on the day of the opening, but we are confident that it will be oversubscribed well within the given period. (DG)