A number of capital market experts and managers of small and medium-sized enterprises (SMEs) registered in Nile Exchange (NILEX) said that NILEX still lacks governmental vision which could turn it into major financier of SMEs rather than banks.
Although Egypt had launched a bourse to finance SMEs eight years ago, it has attracted only 31 companies so far. Twenty-three companies are already registered and their shares are offered for trading with an average of less than four companies annually.
Chairman and CEO of Eagle Financial Consultancy Yasser Emara said NILEX has failed in achieving its goal of helping small companies to receive funds away from the banks, as well as increasing the owners and bringing new contributors.
NILEX has failed as its registered companies could not increase their capitals to finance required expansions and their shares witnessed severe decline during the last period.
He did not deny that NILEX and Egyptian Exchange were affected by the economic slowdown suffered by the country since 2011 due to political instability.
Only seven companies out of 31 registered companies have increased their capital to reach only EGP 100m. Univert Food Industries (UNFO) has around 49.8% of the total funds, estimated at EGP 50.2m.
Emara pointed out that the rest of the NILEX’s registered companies suffer a recession in trading volumes. He urged the concerned authorities to facilitate the procedures of registration, offering shares and trading to encourage companies to register and attract individuals to buy and sell shares and increase the companies’ capital.
He suggested that NILEX’s companies can offer bonds susceptible of turning into shares to be purchased by banks within the Central Bank of Egypt’s (CBE) last initiative to provide large funds for SMEs.
Emara noted that his company has contributed to register three companies in NILEX so far, and there are another two companies underway. He urged the ministries of investment and finance, and the CBE to stimulate the secondary market of bonds which allows selling and purchase of bonds after the initial public offering (IPO).
Chairman of MB for Engineering and Contracting Ahmed Bahaa El-Din said that NILEX is a major source for providing finances for SMEs looking for diversification of its financing tools.
NILEX has not developed to the extent required so far because of instability in the country over the past five years.
Bahaa El-Din said that he will offer a share of his company in a few days to implement expansions in his factory, which assembles electricity panels and electrical transformers in Sadat City, over the coming years.
He added that registering his company in NILEX was a good chance to increase its capital, especially as it seeks to sign new deals in Egyptian market in 2016.
In May 2012, UNFO increased its cash capital from EGP 39.6m to EGP 59.6m, and then recorded EGP 80m in January 2015 and EGP 89.9m by the end of 2015.
Hence, UNFO received finances of EGP 50.2m within three years, and it seeks now to increase its capital for the third time to reach EGP 100m.
The increase of the company’s finances contributed to an increase in profits to reach EGP 1.8m after the first nine months of 2015; whereas the company had recorded profits of only EGP 183,700 during 2010, before it was registered in the bourse.
Marseilia Egyptian Gulf Real Estate Investment ranked second after its capital witnessed an increase of EGP 35m in 2012 and 2014 to reach EGP 60m.
CFO of Marseilia Egyptian Gulf Real Estate Investment Islam Abdel Hamid said his company raised its capital twice since it was registered in the bourse in 2011. The first time was in 2012 as Marseilia increased its capital from EGP 25m to EGP 40m through profits. In 2014, the company increased its capital from EGP 40m to EGP 60m through an IPO by old shareholders of the company.
He added that the company benefitted from increasing its capital when financing its projects, which led to an increase in profits within the four years since it registered in the bourse.
Abdel Hamid noted that Marseilia’s profits grew to reach EGP 11.3m during the first nine months of 2015, compared to EGP 4.6m in 2010, before it was registered in the bourse.
B.I.G for Trading and Investments ranked in third place after its capital witnessed an increase of EGP 30m to reach EGP 40m.
The increase of capital came from two sources: EGP 15m came from credit balances and another EGP 15m in cash from old shareholders. This increase contributed to achieving high growth rates of profits estimated at EGP 5m during the first nine months in 2015.
International Company for Medical Industries (ICMI) ranked fourth after it increased its capital for two times in a row. The first time was of EGP 1.6m through accumulating shares to reach EGP 5.6m. The second was of EGP 6.4m in cash to reach EGP 12m.
The fifth company is Utopia Real Estate Investment and Tourism S.A.E as it increased its capital to reach EGP 15m during 2012 after it was registered in the bourse in October 2009 with a capital of EGP 5m.
Chairman of Utopia Ahmed Zain said his company increased its capital by EGP 10m to reach EGP 15m in 2012.
Zain pointed out that Utopia turned to profit once it joined the bourse as it recorded profits of EGP 5m during 2010, compared to a net loss of EGP 2.8m during 2009. He cited the customer’s high confidence in the company after the application of corporate governance and disclosure.
He said the company made a profit of EGP 5.2m by the end of the first nine months of 2015.
The list of NILEX Sponsors has not witnessed any activity during the last period, as White House Securities has registered 12 companies while First for Financial Consultancy registered nine companies.
Eagle Financial Consultancy has registered only three companies. Fincorp Investment Holding, Egy Trend Financial Consultant, M.H for Financial Consultancy, Thekat Financial Consultancy of Securities, Naeem Brokerage, National Bank of Egypt (NBE) and Grand Investment for Trading registered one company each.
According to Emara, the Minister of Investment should reconsider the cost of registering companies in NILEX which is paid an annual average of EGP 15,000 to EGP 25,000. He urged the minister to lower the costs as a transitional phase to facilitate registering companies.
He said NILEX management should consider shortening the pre-entry procedures of registering securities, as some companies have been waiting for more than a year to prepare their register papers and offer their shares.