Lusaka Securities Exchange indigenous financial institutions, Investrust Bank Plc, is in the market for K400.5mln ($22.3mln equivalent) for capitalization purposes. According to a Stock Exchange News – SENs update Investrust Bank (ISIN:ZM0000000235 – ‘INVESTRUST’) will have an extraordinary general meeting on the 05 June 2020 to pass resolution to approve the raising of K400,497,909.75 through a 5 for 1 renounceable rights offer through issuance of 40,825,475 K1 par value ordinary shares at a value of K9.81 per share to shareholders on record date. This was according to a notice issued by the bank signed by its Company Secretary Brian Msidi.
Within a space of three years INVESTRUST has been on a series of capitalization transactions ranging from debt injection from Meanwood Venture Capital Ltd in exchange for preference shares, a rights issue which was undersubscribed deeply thereby triggering an application for a mandatory offer by ZCCM-IH pushing the investment vehicles stockholding to 71.4%. The sanguine intent to capitalize signals solvency and liquidity concerns the local bank has grappled with.
Negative jaws. Investrust currently grapples with ‘negative jaws’ and has been on a loss streak which has resulted in erosion of capital necessitating the urgent need for the board to effect recapitalization. The indigenous bank is renowned for having financed the famous, now defunct Zambian Airways whose debt serviceability strains dented the banks financial strength. At a time when the LuSE listed FI sought to raise capital following the 2012 capital adequacy model for local and international banks which the Zambian central bank had effected in Dr. Michael Gondwe’s era as governor, Investrust got an injection from state mining investment vehicle ZCCM-IH, through a rights issue, whose shareholding soared to 71.4% in the bank. The Industrial Development Corporation – IDC company ZCCM-IH exposure to the banking sector continues to raise concerns on the viability of the investment decision whose net present value remains underwater.
For two consecutive quarters INVESTRUST has exhibited inertia is publishing its prudential financial results timely as losses widen. The bank has since suffered loss of key staff in its C- suite which many have deemed reorganization of management quality as the bank repositions itself.
Illiquidity and Bourse eligibility. Investrust stock has for over a year not traded actively on the LuSE due to illiquidity. As the Securities and Exchange Commission – SEC requires for entities to demonstrate 3 years of consecutive profitability as a key requirement for listing, the markets are left wondering why ISIN:ZM0000000235 has not been delisted from the exchange after half a decade of losses. If capital markets are to earn the confidence they require from a corporate governance to profitability standard perspective, the regulator is required to revisit eligibility of entities for worthiness of being on the bourse.
As at 10.24pm Investrust shares were priced at K12 a share.
The Kwacha Arbitrageur and Cynical Investor
