Airtel Uganda, owned by Indian billionaire Sunil Mittal, has encountered a setback as its initial public offering (IPO) failed to garner sufficient investor interest, with half of the shares going unsold. Investors preferred high-yield government bonds over participating in the IPO.
Airtel Uganda reported that it managed to raise 211.4 billion shillings ($56 million) by selling only 54.5 percent of the 8 billion shares offered. Retail investors contributed a mere 0.3 percent to the IPO. On its debut, the shares remained unchanged at 100 shillings, Bloomberg news report said.
Government bonds in Uganda are offering yields as high as 15 percent, making them an attractive investment option. In contrast, shares of Airtel’s competitor, MTN Uganda, have seen a 14 percent drop in value since its IPO in 2021. Additionally, investor confidence may have been affected by Uganda’s enactment of a stringent anti-LGBTQ law, leading to the withdrawal of the nation’s preferential trade access by US President Joe Biden.
Paul Bwiso, CEO of the Uganda Securities Exchange, suggested that investors may have chosen the perceived lower risk of government securities over the future potential of Airtel’s stock.
Demand for Ugandan government bonds maturing in 2033 significantly exceeded the available supply in a recent auction, underscoring the preference for these bonds.
In an effort to deepen the market, the Ugandan government had mandated that wireless companies sell 20 percent stakes to local investors four years ago. Airtel noted that the state-controlled National Social Security Fund purchased a 10.55 percent stake in the company.
The decision by Airtel to spin off its mobile-money business also contributed to the underwhelming performance of the IPO, according to Benoni Okwenje, the head of financial markets at Centenary Bank.
African telecom operators have been exploring opportunities in their mobile money businesses. In 2021, TPG invested in Airtel’s mobile money unit, valuing it at $2.65 billion. More recently, MTN sold a minority stake in its fintech business to Mastercard, valuing the business at $5.2 billion.