Microfinance and Capital Markets - Council of Microfinance Equity ...

BRI’s stock has performed exceptionally well since the IPO, with a 561% increase on theoriginal price in just three years. The lock-up period for the offering was twelve monthsand expired on November 10, 2004. From the time of the offering to the date the lock-upperiod expired the price increased 143%. From July 7, 2004, the monthly return hasvaried from -19.5% (August 2005) to 24.4% (November 2004) with an average monthlyreturn of 4.12%. As of September 10, 2007, BRI’s shares were trading at some 4.4 xtimes book value and at a price earnings multiple of 16.5.Box 2: BRI IPO Details• Underwriter or Advisor/Sponsoring Stockbroker: PT Bahana Securities• Listed on the Jakarta Stock Exchange, Surabaya Stock Exchange, and internationally forinstitutional investors under rule 144A, U.S. SEC• Trading Symbol: BBRI (Indonesia), BYR (Germany), BKRKF (U.S.)• Auditors: Ernst and Young Prasetio, Utomo and Co.• The proceeds were used to fund future growth, invest in technology, expand branch and unitnetwork, enhance regulatory capital and for the government to raise money through divestment.Primary Information Source: Offering Circular (10/31/07). Currency is not in constant dollars or adjusted for inflation.II. BRAC BANK OFFERINGIn July 2006, prior to the IPO of BRAC Bank, BRAC’s microfinance divisionapproached the capital markets in order to securitize its microfinance portfolio. Thisallowed it to raise BDT 12.6 BN (US $180 million equivalent). The securitization wasstructured by RSA Capital, Citigroup, FMO and KFW. 62On December 11, 2006, BRAC Bank was floated on the Dhaka and Chittagong StockExchanges. BRAC Bank raised some $13 million through the IPO, all of which will beused to expand the bank’s operations throughout Bangladesh. The company sold 50% ofits share capital to the public (this doubled the number of shares outstanding), and allproceeds were received as paid in capital by the bank. None of the existing shareholdersold at the time of the offering; however, the IFC did receive an exemption from the lockupperiod, allowing it to sell immediately if it chose to. 63The distribution of the IPO allowed for one third of the company to be owned by theBangladeshi public, with another 8% split between non-resident Bangladeshis and mutualfunds. The lock-up for BRAC will last three years, an exceptionally long holding periodwhen compared to the usual 90 days to six months that are required by internationalmarkets. BRAC’s stock showed phenomenal growth in its first year. Its stock has62 “Bangladesh: Citigroup Supports World’s First AAA-Rated Microcredit Security,” Citibank, July 2006,www.citigroup.com/citgroup/press/2006/060706b.htm. Also, see Rahman, R. and Mohammed, S.S.,“BRAC Micro Credit Securitization Series I: Lessons from the World’s First Micro-Credit Backed Security(MCBS),” Analytics Ltd, March 2007, Boston.63 Paul Christensen (bank director, BRAC Bank), comments and discussion.32