Post Mortem of IPOs of Citizens Bank and BOA

Tuesday - 14th April, 2009 | ResCon

ResCon performed a thorough research on the recently conluded IPOs of Citizens Bank and Bank of Asia (BOA). The key findings from the research are presented below.

Key Info Citizens Bank Bank of Asia
IPO Worth Rs 300 million Rs 300 million
No. of shares offered 3 million 3 million
Total Collection            Rs 6,160 million Rs 5,671 million
No. of shares applied 61.60 million 56.71 million
Oversubscribed by    20.55 x 18.90 x
% Oversubscription 1953% 1790%
No. of applicants for IPO    275,042 267,834
No. of applicants allotted     71,750 64,484
Share Applied range          50 to 50,000 50 to 100,000
Allotted range                     10 to 1,200 10 to 1,250

  1. Citizens Bank and Bank of Asia issued IPO worth of Rs 300 million each to the general public. The IPOs were good enough to collect a total of Rs 11,831 million from the market.

  2. Each bank offered 3 million shares to general public which attracted applications for 118.31 million shares.  After conducting research, ResCon found that Citizens Bank’s IPO was oversubscribed by 20.55 times (1,953%) while that of Bank of Asia was oversubscribed by 18.90 times (1,790%).

  3. On an average, over 6,000 applications got disqualified during allotment process. These investors were found NOT TO have followed guidelines while applying in the IPO.

  4. Out of 275,042 applicants, who had applied in Citizens’ IPO, only 71,750 applicants (including employees) were allotted shares. On the other hand, only 64,484 applicants got BOA’s share out of 267,834 applicants. This shows that the total applicants who didn’t receive any shares of Citizens Bank are 203,292 while that of BOA are 203,350.

  5. The above point shows that on an average 203,321 investors did not get shares during allotment.

  6. The applicants for Citizens Bank’s IPO received shares in the range from 10 to 1,200; whereby those individuals who had applied for 50 shares received 10 shares while those who applied for 50,000 shares received 1,200 shares. 

  7. In the similar manner, the applicants for Bank of Asia’s IPO received shares in the range from 10 to 1,250; whereby those individuals who had applied for 50 shares received 10 shares while those who applied for 50,000 shares received 1,250 shares.

  8. Both the banks must start distributing the un-allotted money and allotment advice within 5 days of allotment date as per the “Securities Issue Guidelines-2065” which was implemented from 22-Mar-2009 onwards. Hence, going by this law, Citizens Bank and BOA must start distributing un-allotted money and allotment advice before 16-Apr-09.

  9. Hence, the market will be flooded by un-allotted money as we move towards the end of Apr-12 to Apr-18 week. We are expecting an influx of Rs 5,132.60 million into the market during that time. This will increase the money supply in the market which is one of the prime factors that pushes the inflation figure up.  

  10. However, in order to NOT TO let the inflation figure rise above 13%, Nepal Rastra Bank (NRB), our central bank, has already taken the proactive step. To mop up this excess liquidity in the market, NRB is issuing T-bills worth Rs 1,660 on 15-Apr-09. This move will absorb the excess money in the market hence acting as a tool to moderate inflation. The detail information on the T-bills is provided below.

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Nepal Rastra Bank is issuing following 27 days, 90 days, and 363 days Treasury Bills on 15-Apr-09 amounting to Rs 1,660 millions.

27 days
Rs 500 millions
90 days Rs 800 millions
363 days Rs 360 millions

The bid quotations are to be submitted by 13-Apr-09 at 15:00. For further information, visit www.nrb.org.np under Public Debt heading.

Source: Gorkhapatra
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Earlier, NRB had issued repo to bring in Rs 5 billion in the market following Rs 300 million each IPO of Citizens Bank and BOA. This move was basically targeted to ease off the heat of liquidity crunch instigated by IPOs, of the above mentioned banks, which were expected to absorb Rs 11.5 billion from the market.