IPOs dry up with only three issued in fiscal 2011

Volumes also drop 40 per cent at the Karachi Stock Exchange.

KARACHI:

Only three initial public offerings (IPOs) – a key indicator to gauge market’s depth – were issued at the Karachi Stock Exchange (KSE) in fiscal 2011 against eight offerings in the preceding year.

Cumulatively, a sum of Rs2.4 billion is expected to be raised in fiscal 2011 compared with Rs7 billion in fiscal 2010, according to a JS Global Capital research note.

An amount of Rs970 million is expected to be raised through the book-building process, Rs1.1 billion from the general public while Rs290 million was pre-allocated to foreign investors. Amongst the issues this year, one each belonged from the steel, insurance and power sector.

The value-wise subscription of the offerings to the general public stood at only Rs669 million against a target of Rs1.1 billion.

Historically, fiscal 2004 and fiscal 2005 witnessed the highest offerings of 11 and 14, respectively.

Outlook

Pakgen Power’s subscription details announced yesterday depicts a gloomy picture for public offerings in the coming year, despite a 27 per cent return at the local bourse during fiscal 2011, says the note.

While the KSE-100 benchmark index in fiscal 2011 posted a return of 27 per cent so far, the average daily volumes and value witnessed a significant dip of 40 per cent and 46 per cent, respectively.

However, the government’s decision to increase tax credit to 15 per cent from 5 per cent for new listings in the recently announced budget and its intention to privatise public sector entities may result in increased offerings in fiscal 2012, note adds.

Moreover, Engro Corporation is also likely to list three of its subsidiaries in the coming year, with Engro Foods being the first one on July 5 to 7, 2011.

Published in The Express Tribune, June 24^th, 2011.