Public subscription: IPO of Engro Fertilizers entering final phase

Published: December 4, 2013

Investors will subscribe to 18.75m shares at the rate of Rs28.25 per share. PHOTO: engrofertilizers.com

KARACHI: 

Following a successful book-building exercise aimed at attracting institutional investors and high-net worth individuals, the initial public offering (IPO) of Engro Fertilizers is about to enter its final phase where general public will subscribe to the stock at the price of Rs28.25 a share.

“The IPO of Engro Fertilizers is the best investment opportunity ever,” AKD Group Chairman Aqeel Karim Dhedhi said while speaking to The Express Tribune recently.

Along with Next Capital, AKD Securities is the book-runner for the issue. The general public portion of the IPO will consist of 25%, or 18.75 million shares, of the total issue size of 75 million ordinary shares.

“Within the first 10 days of its trading, the share price of Engro Fertilizers is expected to soar to Rs33,” according to AKD Securities CEO Muhammad Farid Alam. “Eventually, the share performance depends on the availability of gas as well as the rate at which the company gets it,” he added.

With the establishment of a 1.3-million-ton, state-of-the-art fertiliser complex in 2011, the company’s annual urea production capacity stands at 2.3 million tons, which is equal to one-third of the country’s total urea production capacity.

Engro Fertilizers has been in trouble due to unavailability of natural gas, which resulted in a net loss of Rs2.9 billion at the end of 2012. This is despite the government’s pledge to provide the company’s Deharki plant with gas at a price of $0.75 per million British thermal units (mmbtu).

Elixir Securities CEO Junaid Iqbal says his brokerage house anticipates the share price will increase to Rs54 per share in the best-case scenario in which both plants of the company receive promised gas supplies. In the worst-case scenario, wherein one plant remains shut, the stock price may drop to as low as Rs24 per share.

“Although one can’t be sure about it, it seems that the present government will honour its commitment,” Iqbal remarked about the possibility of the company getting natural gas at the subsidised rate.

According to Global Securities research analyst Imran Ahmed Patel, investment in Engro Fertilizers will offer a return better than Engro Corp in the short term at least.

“A lower free float, coupled with a huge interest in the IPO, is likely to drive the share price up in the short term, presenting an opportunity for some quick gains to the investors,” Patel said.

But given the fast-depleting gas reserves in Pakistan, does it even make sense to invest in a fertiliser company? After all, industry experts believe that domestic natural gas production, after peaking in 2014, will start declining and is expected to be less than 2,400 mmcfd in 2021.

Speaking to The Express Tribune, Engro Corp former president Asad Umar said although he is out of touch with the current state of affairs at the company, he believes the new plant will generate impressive profits even if it uses imported gas instead of relying on local gas supplies.

Umar has said in the past that the company is willing to import LNG in case the government fails to provide natural gas at the promised subsidised rate. In that case, Umar said, the company must ensure that it is allowed to either export its product to Indian Punjab or sell the same to domestic farmers at a price that is globally competitive.

According to KASB Securities research analyst Shagufta Irshad Khurram, Engro Fertilizers is her brokerage house’s ‘top pick’ in the fertiliser industry because it is the only company with an ‘embedded growth angle’.

“We expect Engro Fertilizers to report three-year earnings per share with cumulative annualised growth rate of 21%, emerging from volumetric growth with improved gas supply in 2015 and de-leveraging of balance sheet,” she said.

Published in The Express Tribune, December 4th, 2013.

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Reader Comments (22)

  • Question
    Dec 4, 2013 - 4:28PM

    Any idea what the dates for the IPO are?

    Recommend

  • engr
    Dec 5, 2013 - 5:55PM

    I think Engro made a big mistake by investing huge money around 1billion $ in a large fertilizer plant. Looking at the siutation of gas in the country, for next decade it seems very difficult that its both plants will keep running. Security situation of country plays a vital role in it also, as we are not able to explore new reserves of gas and continously depleting existing ones. Demand is increasing day by day as population is increasing at a fast rate where as supply is reducing.

    Recommend

  • Sidd
    Dec 7, 2013 - 12:39AM

    IPO dates are 16th and 17th of December 2013. Prospectus and share form are available at http://engrofertilizers.com/Recommend

  • Shazib Habib Memon
    Dec 9, 2013 - 5:57PM

    @Question: 16 to 17 Dec

    Recommend

  • hasan
    Dec 15, 2013 - 8:47PM

    IPO dates are too shot

    Recommend

  • hasan
    Dec 15, 2013 - 8:48PM

    IIPO dates too shoot

    Recommend

  • hasan
    Dec 15, 2013 - 9:02PM

    IPO dates are too short

    Recommend

  • Shad
    Dec 16, 2013 - 3:04PM

    Is it good time to invest in engro ???

    Recommend

  • M.Asad
    Dec 16, 2013 - 6:52PM

    i just want to know can i submit an application for the engro iop , without having any CDC account, and how can i get share and then sale them in the absence of CDC account?

    Recommend

  • irum
    Dec 17, 2013 - 2:41PM

    is it beneficial

    Recommend

  • Yasir Hasan
    Dec 17, 2013 - 5:27PM

    It’s the first time that I have filled a Share application. How long does it take to get the results normally? where will I get it? :)

    Recommend

  • Dr. Raheel Channa
    Dec 18, 2013 - 3:36AM

    Any idea can engrow fertilizers share benefit?

    Recommend

  • Iftikhar Ahmed Malik
    Dec 20, 2013 - 8:07AM

    Sir,
    I want to take shares in your firm, may I know how I can obtain shares?
    Kindly let me know the procedure for obtaining it.

    Recommend

  • Khalil Shaikh
    Jan 2, 2014 - 4:33PM

    Dear Please let me know when will result announce of Engro Fertilizer Ltd Shares which I submitted on 16 dec 2013.

    Recommend

  • Jan 6, 2014 - 12:10AM

    @M.Asad: you can contact me at given email address…

    Recommend

  • Ashraf Kaleem
    Jan 11, 2014 - 11:46AM

    The Engro Fertilizer Shares may be beneficial in Long Terms but in short terms surely not…
    Don’t mix it with Engro Shares..

    Recommend

  • Sidd
    Jan 11, 2014 - 6:52PM

    Allotment have been completed. All 500 & 1000 shares application have been accepted, while balloting carried out on 1500 shares application.
    …successful applicants will receive their share certificate within two weeks, while unsuccessful applicants can check with their banks for money returned

    Recommend

  • Tariq Yaqoob
    Jan 12, 2014 - 1:26PM

    @Yasir Hasan:
    You will be receiving the shares in your CDC account ,or by mail on or before 15-1-2014

    Recommend

  • Aamer nawaz
    Jan 17, 2014 - 12:14PM

    I have applied for 1000 physical shares in engro fertilizers IPO .. Will they dispatch the share certificates to the bank or my home address, And when ?

    Recommend

  • Ajmal
    Jan 22, 2014 - 12:30PM

    As I read that the applicants of 500, 1000 share are successful, I neither received shares nor mony. I had applied for 1000 sharesRecommend

  • Dr. Ibad
    Jan 24, 2014 - 12:11PM

    I had purchased 1500 shares and received email that u will get ur owner certificate from ur acount maintaining branch on 16 Jan, 2013. I visited the branch on 20 Jan but branch manager said that we have not received yet. kindly update me.

    Recommend

  • Dr. Ibad
    Jan 24, 2014 - 1:39PM

    i was informed that ur certificate will delivered to ur account maintaining branch upto 16 Jan, 2013 but I have not received yet.

    Recommend

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