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NSSF could recoup 26% of Shs199b invested in Airtel IPO by December
NSSF announced on Friday that it had bought shares worth Shs199b in the Airtel initial public offering. PHOTO / FILE
What you need to know:
- In a deadline day announcement, NSSF said it had made a decision to buy a 10.55 percent stake in the Airtel initial public offering
National Social Security Fund (NSSF) could recoup at least 26 percent of its Shs199b investment in the Airtel initial public offering (IPO) by December after dividend pay-out.
The deadline-day move, analysts have indicated is beneficial to the Fund given that it saved NSSF Shs200b to buy a 10.55 percent stake at a value that would have reached Shs400b had it not been discounted by about 50 percent.
Airtel had offered a total of 40 billion shares but is listing only eight billion. NSSF applied to buy 10.55 percent of the 40 billion, which is 4.22 billion shares.
The offer closed last Friday after the October 13 closure date had been extended by 15 days.
NSSF is expected to recoup dividends of about Shs52b, according to Airtel’s projected Shs500b dividend pay-out for the year ended December 31, which is about 26 percent of the Shs199b.
“Post-offer, new shareholders, if eligible as of the dividend entitlement date(s) will be entitled to receive undistributed interim and or final dividends for financial year ending December 31, 2023 in accordance with the company’s dividend policy,” Airtel noted in its prospectus.
The Uganda Securities Exchange listing rules require approved dividends to be paid within 21 days of the book closure.
In its prospectus, Airtel indicated that dividends paid in respect of the first quarter amounte to Shs38.08b and Shs80.719b in respect of the second quarter, while the telecom expects to declare a dividend in respect of the third quarter next month.
NSSF, in its annual report for the period ended June 2023 indicated that dividend income experienced the biggest growth among its revenue streams, rising from Shs99.8b in June 2022 to Shs145.12b in June 2023.
Other streams include real estate investments and government papers, which have treasury bills and bonds.
During the period, NSSF earned more money from MTN’s dividend pay-out compared to other stocks, recording an income of Shs31.5b from Shs9.3b for its 8.84 percent stake in the telecom.
Airtel is targeting to raise Shs800b from its offer, which it has incentivised to allow a wide share-uptake.
The incentivised share offer has seen the purchase price diluted from Shs100 to Shs47 for institutional investors and Shs71 for retail investors.
Dividend policy
Airtel has a dividend policy of 95 percent of retained earnings or net profit after tax, whichever is higher.
However, it has indicated that the dividend pay-out ratio in any given year will be subject to multiple factors, including financial parameters and internal factors such as financial performance, impact of return on equity and alternative use of cash, and external factors such as macroeconomic conditions, statutory requirements and agreements with lending institutions.
The telecom also states in its prospectus that it may occasionally amend its dividend policy and that it cannot guarantee that dividends will be paid in future.
“While the board has adopted a dividend policy that reflects the long-term earnings and cash flow potential, there can be no assurance that the company will pay dividends in the future at the projected levels or at all,” Airtel said.
