Uchumi Supermarket is set to raise Sh3.5 billion through equity capital in the next 120 days as part of its financial recovery strategy.
In a public notice issued to investors last Friday, Uchumi revealed that talks are underway with a potential investor ready to pump in Sh3.5 billion by buying part of its Sh5 billion new shares.
It went on to urge shareholders and other investors to exercise caution when dealing in retailer’s ordinary shares on the Nairobi Securities Exchange (NSE).
In January last year, an investors’ annual general meeting resolved to identify a stable investor ready to pump in Sh5 billion by way of debt capital, convertible debt instruments or equity capital.
The retailer’s chief executive officer Julius Kipngetich revealed that talks with the potential investor commenced on August,1 and hopes to complete all transaction processes in the next 120 days.
‘’I thank all partners and friends of Uchumi who have continuously supported our company to realize this vision by committing both money and time to bring this company back to greatness. We are optimistic that the transaction process will come to a conclusion within the stipulated time or less, which will mark the completion of the last mile of recovery strategy,’’ said Kipngetich.
The funds will be used to restock, pay old debts and build public confidence in the struggling retailer whose employees participated in a national protest to demand their two months salaries in early June.
The cash-strapped listed retailer has historically grappled with financial instability forcing it to seek bailout from shareholders, financial institutions and even selling some of its assets. In 2006 for instance, Uchumi was declared insolvent and suspended from trading on the NSE due high public debt.
Although it was readmitted to the bourse in 2011 after raising Sh675 million through government bailout and conversion of suppliers debt into equity, the retailer risked another NSE suspension after slipping into a negative net asset position, with a debt load of Sh6.3 billion against a total asset base of Sh6.1 billion in 2015.
After posting an after tax loss of Sh2.8 billion last year, the retailer successfully lobbied for a government bailout of Sh1.8 billion to support its operations. In January this year, it received the first Sh500 million which was used to settle its debts with suppliers
Another Sh700 million was released by the treasury in May this year to support the firm’s local operations and the remaining Sh600 million is expected at a later date to offset debts the retailer owes suppliers in Uganda.
The expected funding from the potential investor is expected to revive the firm’s competitiveness and stir activities in Kenya’s shaky retail sector which is currently experiencing a slowdown.
This year alone has seen Nakumatt Holdings, one of the regional leader in the retail sector close more than 10 branches in Kenya and Uganda.
The new entrant joins Jamii Bora and the government as major shareholders in the retailer. The two have 15.8 and 14.6 per cent shareholding.