The week in focus
Recent announcements about launching of a share offer in the domestic market could trigger a wave of investment.
The recent announcements about launching of a share offer worth billions of rupees in the domestic market and listing of shares in the New York market could instil confidence in the corporate sector and trigger a wave of investment in the country.
About a week ago, International Steel Limited announced that it will make a Rs3 billion initial public offering (IPO) in the country’s bourses to attract funds to pay off loans taken from banks for setting up the venture. The IPO will not only provide funds to the company but will also offer an opportunity to investors to buy shares in a company which, according to a report, earned a revenue of Rs2.5 billion in the first three months (January to March) of its operations.
“The market has appetite for absorbing lucrative offers and foreign investors are still present,” said Khurram Schehzad, Head of Research InvestCap. “Companies which have balance sheets showing profits will attract investors, leading to a widening of investor base in the market,” he said.
According to BMA Capital Head of Equity Research Hamad Aslam, most of the Rs3 billion offering of International Steel will be placed with institutional investors and the rest will be given to individual investors.
Besides International Steel, three IPOs of Engro Corporation are also in the pipeline, which will be floated by Engro Foods, Engro Fertiliser and Engro Energy.
Listing in New York market
Another company Fatima Fertiliser is planning to list American Depository Receipts (ADRs) in the New York market in a bid to get international exposure and investment to fund its future plans. This is for the first time that shares of a Pakistani company are going to be traded on over-the-counter market in New York. According to an analyst, a $750 million ADR issue has been approved.
As Pakistan’s economy is based on agriculture with emphasis on cultivating more area with crops, particularly staples like wheat and rice, fertiliser manufacturing has bright prospects in the country. Pakistan has not been self-sufficient in fertiliser production and its demand exceeds supply, but after expansion of Engro Fertilisers capacity, it is expected that there will be no need for imports.
“Fertiliser is a safe investment like that of oil and electricity. All these have a high demand in the country, which could not meet their requirement, prompting the need for imports,” Schehzad of InvestCap said.
He said the floating of ADRs abroad will give the company safe investment and international recognition, adding this could encourage other companies to follow suit and expand their businesses. Eventually, benefits will accrue to the country in the form of increase in revenues and investment at a time when it has been battling security problems, political uncertainty, weak economy and reduced investment.
Attractive marketing
Separately, the government is planning to float shares of state-run companies in domestic stock markets to inject liquidity into these enterprises. In addition to this, the government is preparing to launch exchangeable bonds of the Oil and Gas Development Company in the international market. “To make the plan a success, the government has to do proper marketing before launching the offerings,” stressed Schehzad.
In order to reap the fruits of all these offerings, the country needs to control law and order situation, improve corporate governance, tackle corruption and bring political stability. External factors will also have an impact. As seen in the last one to two months, the political upheaval in the Middle East and North Africa rocked world equity markets, including that of Pakistan. The wave of revolution in this region still continues and there seems to be no end in sight.
The writer is incharge Business desk for the Express tribune and can be contacted at ghazanfar.ali@tribune.com.pk
Published in The Express Tribune, March 14th, 2011.
About a week ago, International Steel Limited announced that it will make a Rs3 billion initial public offering (IPO) in the country’s bourses to attract funds to pay off loans taken from banks for setting up the venture. The IPO will not only provide funds to the company but will also offer an opportunity to investors to buy shares in a company which, according to a report, earned a revenue of Rs2.5 billion in the first three months (January to March) of its operations.
“The market has appetite for absorbing lucrative offers and foreign investors are still present,” said Khurram Schehzad, Head of Research InvestCap. “Companies which have balance sheets showing profits will attract investors, leading to a widening of investor base in the market,” he said.
According to BMA Capital Head of Equity Research Hamad Aslam, most of the Rs3 billion offering of International Steel will be placed with institutional investors and the rest will be given to individual investors.
Besides International Steel, three IPOs of Engro Corporation are also in the pipeline, which will be floated by Engro Foods, Engro Fertiliser and Engro Energy.
Listing in New York market
Another company Fatima Fertiliser is planning to list American Depository Receipts (ADRs) in the New York market in a bid to get international exposure and investment to fund its future plans. This is for the first time that shares of a Pakistani company are going to be traded on over-the-counter market in New York. According to an analyst, a $750 million ADR issue has been approved.
As Pakistan’s economy is based on agriculture with emphasis on cultivating more area with crops, particularly staples like wheat and rice, fertiliser manufacturing has bright prospects in the country. Pakistan has not been self-sufficient in fertiliser production and its demand exceeds supply, but after expansion of Engro Fertilisers capacity, it is expected that there will be no need for imports.
“Fertiliser is a safe investment like that of oil and electricity. All these have a high demand in the country, which could not meet their requirement, prompting the need for imports,” Schehzad of InvestCap said.
He said the floating of ADRs abroad will give the company safe investment and international recognition, adding this could encourage other companies to follow suit and expand their businesses. Eventually, benefits will accrue to the country in the form of increase in revenues and investment at a time when it has been battling security problems, political uncertainty, weak economy and reduced investment.
Attractive marketing
Separately, the government is planning to float shares of state-run companies in domestic stock markets to inject liquidity into these enterprises. In addition to this, the government is preparing to launch exchangeable bonds of the Oil and Gas Development Company in the international market. “To make the plan a success, the government has to do proper marketing before launching the offerings,” stressed Schehzad.
In order to reap the fruits of all these offerings, the country needs to control law and order situation, improve corporate governance, tackle corruption and bring political stability. External factors will also have an impact. As seen in the last one to two months, the political upheaval in the Middle East and North Africa rocked world equity markets, including that of Pakistan. The wave of revolution in this region still continues and there seems to be no end in sight.
The writer is incharge Business desk for the Express tribune and can be contacted at ghazanfar.ali@tribune.com.pk
Published in The Express Tribune, March 14th, 2011.