Gap between issue and market price higher than in ComBank and HNB rights issues
Sampath Bank has summoned an extraordinary general meeting on Oct. 20 to obtain shareholder approval for a one for six rights issue at a price of Rs. 245 per share to infuse approx. Rs. 7.6 billion zero cost equity funds into its books.
In a circular to shareholders, the bank said that it was intended to issue 31.03 million new voting shares under the rights issue which analysts noted has been priced well below the prevailing market price of Sampath shares which closed on Friday at Rs. 326.
"Sampath follows Commercial Bank and HNB in floating a rights issue to meet Basel III regulations," an analyst said. "The gap between the rights price and the then market price of the HNB share was the narrowest in the two issues which were fully subscribed barring the HNB non-voting shares where much of the slack was later taken up."
"Shareholders who applied for additionals over and above their entitlements were satisfied to a fair degree by Commercial Bank and less so by HNB," the analyst said. "Give the recent appreciation of the Sampath share, full subscription will not be a problem."
Sampath said that fractional shares will not be allotted. Such shares would be pooled together and allotted to shareholders applying for additionals "on a reasonable basis," the circular said.
Sampath made a profit of Rs. 5.7 billion in the first half of this year at company level and Rs. 5.87 billion at group level.
The circular to shareholders said the bank intended to utilize the total proceeds of the rights issue to expand its loan book over a period of three to six months of the allotment of the shares and the funds will be lent in the normal course of business.
"The rights issue will provide an opportunity for the existing shareholders to invest in ordinary voting shares of the company at a discount of Rs. 55.24 compared to the net asset value of Rs. 300.24 as at June 30,2017," it said.
"Consequently they will be entitled for future dividends and possible market value appreciation on the shares."
Given the current demand for credit in the country, the possibility of not being able to lend the proceeds of the rights issue is "very remote," it added. "Even in the worst case scenario, the funds could be invested in government securities which are readily available for investment."
In June, July and August the Sampath share traded at a high of Rs. 302 and a low of Rs. 266.20 closing in Aug. at Rs. 301.30. The share is liquid with over 7.6 million shares traded in the three months. Sampath closed at Rs. 326 on Friday.
Mr. Dammika Perera’s Vallibel One is the bank’s top shareholder with 14.95%. Mr. YSHI (Indra) Silva follows with 9.99% and the EPF is the third biggest with 9.97%.
Sampath paid a cash dividend of Rs. 4.75 per share and a scrip dividend worth Rs. 14 for the year ended March 31, 2017. Dividends during the previous two years were Rs. 6 cash and Rs. 7 scrip and Rs. 5 cash and Rs. 6 scrip.
Sampath Bank has summoned an extraordinary general meeting on Oct. 20 to obtain shareholder approval for a one for six rights issue at a price of Rs. 245 per share to infuse approx. Rs. 7.6 billion zero cost equity funds into its books.
In a circular to shareholders, the bank said that it was intended to issue 31.03 million new voting shares under the rights issue which analysts noted has been priced well below the prevailing market price of Sampath shares which closed on Friday at Rs. 326.
"Sampath follows Commercial Bank and HNB in floating a rights issue to meet Basel III regulations," an analyst said. "The gap between the rights price and the then market price of the HNB share was the narrowest in the two issues which were fully subscribed barring the HNB non-voting shares where much of the slack was later taken up."
"Shareholders who applied for additionals over and above their entitlements were satisfied to a fair degree by Commercial Bank and less so by HNB," the analyst said. "Give the recent appreciation of the Sampath share, full subscription will not be a problem."
Sampath said that fractional shares will not be allotted. Such shares would be pooled together and allotted to shareholders applying for additionals "on a reasonable basis," the circular said.
Sampath made a profit of Rs. 5.7 billion in the first half of this year at company level and Rs. 5.87 billion at group level.
The circular to shareholders said the bank intended to utilize the total proceeds of the rights issue to expand its loan book over a period of three to six months of the allotment of the shares and the funds will be lent in the normal course of business.
"The rights issue will provide an opportunity for the existing shareholders to invest in ordinary voting shares of the company at a discount of Rs. 55.24 compared to the net asset value of Rs. 300.24 as at June 30,2017," it said.
"Consequently they will be entitled for future dividends and possible market value appreciation on the shares."
Given the current demand for credit in the country, the possibility of not being able to lend the proceeds of the rights issue is "very remote," it added. "Even in the worst case scenario, the funds could be invested in government securities which are readily available for investment."
In June, July and August the Sampath share traded at a high of Rs. 302 and a low of Rs. 266.20 closing in Aug. at Rs. 301.30. The share is liquid with over 7.6 million shares traded in the three months. Sampath closed at Rs. 326 on Friday.
Mr. Dammika Perera’s Vallibel One is the bank’s top shareholder with 14.95%. Mr. YSHI (Indra) Silva follows with 9.99% and the EPF is the third biggest with 9.97%.
Sampath paid a cash dividend of Rs. 4.75 per share and a scrip dividend worth Rs. 14 for the year ended March 31, 2017. Dividends during the previous two years were Rs. 6 cash and Rs. 7 scrip and Rs. 5 cash and Rs. 6 scrip.
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