Airtel Uganda Ltd., owned by Indian billionaire Sunil Mittal, faced a setback as its initial public offering (IPO) failed to attract significant investor interest. The IPO saw only about half of the shares on offer being sold, as investors opted for high-yield government bonds over the IPO.
Airtel reported that it raised 211.4 billion shillings ($56 million) by selling just 54.5% of the 8 billion shares on offer. Retail investors accounted for only 0.3% of the IPO, and on its debut, the company's shares remained unchanged at 100 shillings, as reported by Bloomberg.
Government bonds in Uganda are offering yields as high as 15%, making them an attractive choice for investors. In contrast, shares of Airtel's competitor, MTN Uganda Ltd., have experienced a 14% decline since its IPO in 2021. Additionally, concerns among investors have arisen following Uganda's enactment of a stringent anti-LGBTQ law, prompting the withdrawal of the nation's preferential trade access by U.S. President Joe Biden.
The significant demand for Ugandan government bonds maturing in 2033, which exceeded the amount available in a recent auction by eightfold, underscores the preference for less risky government securities among investors.
Four years ago, the Ugandan government mandated wireless companies to sell 20% stakes to local investors to enhance market depth. The state-controlled National Social Security Fund purchased a 10.55% stake in Airtel, according to the company.
Additionally, the decision by Airtel to spin off its mobile-money business contributed to the IPO's lackluster performance, according to Benoni Okwenje, the head of financial markets at Centenary Bank.
African telecom operators have been exploring opportunities to capitalize on their lucrative mobile money businesses. TPG invested in Airtel's mobile money unit, valuing it at $2.65 billion in 2021, and MTN recently sold a minority stake in its fintech business to Mastercard, valuing the business at $5.2 billion, as reported by Bloomberg.
(With Agency Inputs)