Uchumi Supermarket has been given the go-ahead to raise about Sh1 billion in a rights issue next month.
The retailer is seeking funds to spearhead its expansion in East Africa, following approval by the Capital Markets Authority.
Uchumi plans to open new branches across East Africa and refurbish local outlets.
“We plan to open more branches across East Africa in a bid to competitively position our business and this requires substantial capital expenditure.
“We also want to be able to adequately finance working capital for our subsidiaries with a consequent growth in market share and sales volumes,” said the supermarket’s Chief Executive Officer Jonathan Ciano in a statement on Friday last week.
The rights issue will open on November 10 and close on November 28. Uchumi has 33 branches in Kenya, Uganda and Tanzania, but is looking to venture into Rwanda and South Sudan with the new capital.
Analysts, however, say increasing competition, especially for strategic locations, continues to put pressure on the retailer’s growth prospects.
“With only two branches in the central business district (Nairobi), Uchumi has not been fighting to acquire these locations especially in shopping malls where customers have been looking for one-stop shops.
This reduces its visibility, revenue generation capacity and eventually market share,” noted a June 2014 report by Africa Investment Bank analyst Teddy Yanga.
He said the firm’s ability to exploit the potential in local and regional retail sector depends on the aggressiveness in implementing its expansion strategy to counter competition.