The FAR Property Company (FPC) has announced its Initial Public Offering (IPO) results for its imminent listing on the Botswana Stock Exchange (BSE) that will see a total of 380 million linked units listed on the main domestic counter of the BSE. For the public offer, 40 million subscription linked units were issued for the IPO and private placement. The 20 million linked units available to the members of the public had a 1.2 oversubscription. There were 646 applicants for 24 035 700 linked units for the offer price of P2.57.
The remaining 20 million linked units will be allotted and issued to institutional investors in a private placement. The 40 million units sold are an addition to the other 40 million linked units that are to be sold by the founders immediately after listing.
“Applications for 4 035 700 linked units were received from members of the public. Applications for 20 000 000 linked units were received from institutional investors. Members of the public will be allotted linked units equal to their applications, i.e. will receive the number of linked units applied for in full. The institutional investors are allotted 15 964 300 linked units, allotted amongst them, in proportion to their applications,” read part of the press release.
FPC is expected to list on the 4th of May, joining the other 5 existing property companies and bringing the total number of listed companies on the main board to 22. Furthermore, FPC with its issued 380 million units at an offer price will debut with a market capitalisation P976.6 million, making it the 3rd most valuable listed property company on the BSE.
The founders of FPC have now become legends in successfully listing companies; their maiden listing was a resounding success as they listed Choppies, first in the BSE and subsequently in the Johannesburg Stock Exchange. In this listing, the founders are looking at a windfall of about P102 million while the company will also pocket the same. The reason for listing the company was to raise funds for ongoing projects and other future projects.
Prior to the IPO, FPC had 340 million linked units with founders Ramachandran Ottapathu and Farouk Ismail each holding 170 million linked units. In preparation for the listing, 40 million new units were issued bringing the total number of linked units to 380 million. From the newly added 40 million units, an offer was made to the public to apply for 20 million linked units, while the other 20 million linked units was for private placement. The issued 40 million units will raise in excess of P100 million for the Company and a concurrent sale by the existing shareholders of the Company of 40 000 000 linked units to realise approximately P100 million for the sellers.
According to the company prospectus, the founders have sold, subject to the result of the IPO, 40 million linked units to selected institutional investors at the offer price per linked unit. During the book building stages, 40 million linked units were offered for sale by the founders and the 40 million subscription linked units offered for subscription by the company i.e. a total of 80 million linked units were offered to the placees. Linked units in excess of 95 million were taken up, representing an oversubscription of 20%. The oversubscription was a signal that there was demand for FPC’s linked units, prompting the company to have a public offer constituting of the IPO and private placement.
Following the IPO, the listing, and the subsequent sale of units by the founders, as set out in the prospectus, the issued units of the Company will be held as follows: Ramachandran Ottapathu and Farouk Ismail as the founders will now hold 79% of the company as each man holds 150 million linked units, representing 39.5% for each founder. The public will now hold 20.7% which represents 78 981 500 linked units, while directors and their associates lay claim to 0.2% which is 768 500 units and the last 0.1% representing 250 000 units is held by associates of Ramachandran Ottapathu.
The FAR Property Company was founded in 2010 to accommodate the Choppies Group needs as the retail giant was in need of properties to rent during its exponential growth and expansion era. The company then began its string of property acquisitions, in the process the company has acquired 182 properties in Botswana and has acquired 23 properties in South Africa. Although, the initial plan was for the properties to serve the needs of Choppies group, the development of the Choppies brand and market position in Botswana attracted the public to premises occupied by a Choppies outlet.
This led to demand by other providers of consumer services to seek accommodation for their outlets at the location of Choppies outlets. The Company became less reliant on the Choppies Group for take up of space in its properties, and the size and nature of the properties changed. The company’s property portfolio has grown over the past 6 years; by 2015 the company had P1.3 billion assets, and the company brought in P92 million in revenues in 2015.
This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.
The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.
Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.
He was speaking in Parliament on Tuesday delivering Parliament’s Finance Committee report after assessing a motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.
Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.
The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.
The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.
The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.
This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.
Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.
Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.
However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.
Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.
When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.
This as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.
Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.
The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.
Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.
In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.
Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.
Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.
Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.
Acknowledging the need to draw down from GIA no more, current Minister of Finance Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”
He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”