First IPO of 2011 launched

International Steels’ offering to end 12-month gap.

KARACHI:

After a gap of 12 months, the first initial public offering (IPO) of 2011 was launched at the Karachi Stock Exchange on Tuesday.

According to a report by Topline Securities, as part of value-added steel firm International Steels’ (ISL) IPO, 61.9 million shares (14 per cent of capital) are being offered through book-building between April 12 and 14 to institutions and high-net worth individuals at a floor price of Rs12.9.

Some 20.6 million shares (4.7 per cent) have been allocated for pre-IPO foreign investors, while 27.5 million shares (6.3 per cent) will be given to general public at the strike price.

Margins to stand around $125 per ton

With one of the lowest per capita steel consumption of 12 kilogrammes, compared with an average of 190 kilogrammes in regional countries, the Pakistani steel market offers huge potential. Moreover, the prevalent supply shortfall provides an assured demand for the company’s product.

International Steels focuses on customised steel products, which provides an ability to charge a steep premium of up to $30 per ton over international prices. This ability is further augmented by the 10 per cent duty protection, which will enhance the company’s absolute margins by another $100 per ton, assuming steel prices hover around current levels, added the report.

Analysts expect average gross margins to stand at around $125 per ton. Rising steel prices also bode well for ISL, as higher prices result in greater advantage, in absolute terms, attained by duty protection.

Published in The Express Tribune, April 13^th,  2011.