Reasons for Low Listing by Agricultural Companies in the Bourse: A Case Study of Del Monte Limited Kenya

Abstract

The economic stability, the key driver of the boom has seen a rush by companies to raise funds from the stock markets. It has never been better time for companies to raise capital from the capital markets. This explains the long list of initial public offers (IPO) and right issues since 2006. Recent IPO include the Kengen, Eveready, scan group, access Kenya and Kenya re-insurance Corporation.

Mumias sugar also made a second offer while equity bank listed in the Nairobi stock exchange (NSE) BY introducing, capital holdings made their right issue all seeking additional funds to bank roll their expansion.

Notably however no agricultural company has featured in the aforementioned IPOs leave alone seeking additional funds through the bourse. This brings to the lime light the problem of persistent minimum listing by agricultural companies (currently stands at 8) on the bourse, despite the fact that Kenya is predominantly an agrarian economy.

The general objective of the study was to find out reasons of low listing by agricultural companies in the bourse. Specifically study intended to identify challenges for listing in the bourse, to establish whether companies knows the opportunities at the bourse, to identify the challenges faced by agricultural companies in Kenya and to establish the need for alternative to the NSE for companies unable to meet the stringent listing rules of the NSE.

A descriptive study was archived by doing a case study of Del Monte Kenya a Thika based subsidiary of Del Monte international inc. the target population was the top management who were issued questionnaires. Secondary data was collected using documentary information from books, company final accounts and relevant publications.

The study found out a number of issues hindering the listing of agricultural companies on the bourse which include listing / application fees, unfavorable legal and regulatory framework on listing, lack of confidence in the NSE and inadequate public awareness.

In light of the findings the study recommends the establishment of an alternative listing avenue for agricultural companies, the NSE and the capital market authority should work towards the efficiency of the Kenya stock market.