Engro to list subsidiaries on bourses

Engro Corporation is planning to list its subsidiaries at local stock exchanges this year.

KARACHI:

Engro Corporation is planning to list its subsidiaries – Engro Foods, Engro Fertiliser and Engro Powergen Qadirpur – at local stock exchanges this year, company official informed on Wednesday.

The local giant will first list Engro Foods between April to June followed by the other two subsidiaries, Engro Corporation Finance Manager Faisal Waheed said while talking to The Express Tribune.

The listing will help determine the valuation of the subsidiaries and result in a one-time capital gain for the company.

The amount raised through the listing will be mainly used for payment of fertiliser sector loans and expansion of food business.

The company will offload 10 per cent shares of Engro Foods and more than ten per cent of Engro Powergen Qadirpur, the company official informed.

If the company offloads five to 10 per cent of its holdings in each company, there could be a one-time capital gain of Rs8 to Rs17 per share for Engro Corporation, said Topline Securities analyst Farhan Mahmood in a research note.

Engro Corporation’s earnings are expected to double by 2012 mainly led by its new $1.1 billion fertiliser plant and its booming food business, added Mahmood.

Foreigner shareholding rising in Engro

Lately, consumer stocks have been a profound choice of offshore investors in emerging and frontier markets. This is due to the fact that consumer goods companies have the ability to sustain demand and pass on the inflationary pressures while maintaining their profit margins, said Mahmood. This is why foreigners bought large amounts of shares in Engro, Nestle and Unilever last year.

Foreigner holding in Engro has increased to more than 40 million shares, which is almost 27 per cent of the free float, according to Topline estimates.

Food unit to be the first

The Corporation is expected to raise Rs1.5 to Rs2 billion through local and foreign offerings of this segment, according to Topline Securities.

Considering the huge demand of consumer stocks, the Engro Foods offer – first among the lot – is likely to get an overwhelming response, said Mahmood.

Analyst assigned a value of Rs22 billion to Engro Foods, which will contribute Rs56 per share to Engro Corporation’s Rs262.

Milk business would remain at the heart of Engro Foods business strategy as Pakistan is the fifth largest milk producing country with more than 40 per cent of the population between 5 and 19 years of age.

Contributing 80 per cent to the entire segment’s revenues, boxed milk segment sales are likely to grow 31 per cent during 2011 to 2014.

The company, a market leader, enjoys 39 per cent market share in packed milk market followed by Nestle’s 32 per cent and Haleeb’s 15 per cent.

The segment also consists of Omore ice cream business, which has captured a market share of 17 per cent in one year. Rest of the share is dominated by Walls with 65 per cent, Igloo eight per cent and Yummy 10 per cent.

However, with the successful launch of ice cream business in Karachi in February, the company is targeting 22 per cent share in 2011 while planning to become second largest company by capturing 30 to 35 per cent market share in the next five years, adds the research note.

Published in The Express Tribune, March 17^th, 2011.