Depending on regulatory approvals, the bank will issue shares in consideration of the IFC investment at Rs28 per share, which will result in an investment of $67 million.
The IFC, a member of the World Bank Group, will also have the option to purchase an additional equity of approximately 5% by December 31, 2015.
The IFC finances and provides advice for private sector ventures and projects in developing countries in partnership with private investors and, through its advisory work, helps governments create conditions that stimulate the flow of both domestic and foreign private savings and investment.
According to Iqbal Dinani of BMA Capital Management, the transaction will increase Bank Alfalah’s paid-up capital by Rs6.7 billion (with issuance of an additional around 238 million shares).
“The raised amount will be utilised (to pursue) the overall growth strategy of the bank wherein it has envisaged increasing its branch network to 700 by calendar year 2015 while maintaining a payout ratio of about 60%,” he said.
Considering 15% of the paid-up capital issue, BMA Capital potentially saw an earnings dilution 2014 onwards, Dinani added.
Bank Alfalah, owned and operated by the Abu Dhabi Group which started operations in November 1997, has at present over 500 branches across the country.
In the first quarter of 2014, the bank’s after-tax profit stood at Rs1.13 billion compared to Rs1.01 billion in the corresponding period of 2013, reflecting a year-on-year increase of 11.6%.
The bank’s share price fell Rs0.19 to close at Rs28.65 at the Karachi Stock Exchange on Thursday.
Published in The Express Tribune, September 19th, 2014.
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