Firms raise Rs35b via share offers

Four new companies went public while 14 issued right shares

Pakistani companies have raised interest-free investment worth Rs35.4 billion through the offer of shareholding to corporates, rich and retail investors at the Pakistan Stock Exchange (PSX) during the outgoing year 2020, according to a brokerage-led research house on Wednesday.

The stock market welcomed four new firms whose shares became available for trade among investors. “PSX witnessed four initial public offerings/IPOs (including preference share listing) in 2020 in sectors like steel, meat processing, telecom and chemicals. Together these companies raised Rs8.4 billion,” Topline Research reported.

Besides, another 14 firms, whose shares were already available for trade at the PSX, raised a further Rs27 billion through the offer of right shares, which are offered to existing shareholders at a notable discount.

The bourse witnessed IPOs and issuance of right shares during the year in spite of the Covid-19 outbreak, it said.

In 2019, companies raised equity totalling Rs35.7 billion through one IPO and 17 offers of right shares.

Data breakdown suggests the new firm raised Rs5 billion in 2019, while 17 firms raised Rs30 billion through right shares wherein Hascol Petroleum took the highest amount of Rs8 billion followed by Hub Power’s issue of Rs7 billion and Maple Leaf Cement’s issue of Rs6 billion.

Outlook

AHL Research anticipated the other day that eight new companies from different sectors including cement, steel, oil marketing, auto and textile would raise investment of around Rs20-22 billion at the stock exchange in 2021.

“With improving outlook on the stock market, many equity IPOs are in the pipeline. Seven companies, like Shell Petroleum, have already announced right shares amounting to Rs16 billion,” Topline Research added.

Year under review

Amongst the four IPOs in 2020, The Organic Meat generated the highest total return (increase in share price) of 50%, followed by Agha Steel’s return of 15%. TPL Trakker has lost 17% of its value since its listing.

First IPO of 2020 was that of The Organic Meat, which came at a strike price of Rs20 per share, 11% higher than the floor price of Rs18. The company offered 40 million shares to raise Rs800 million.

“The purpose of the IPO was to expand the existing capacity and to set up a new offal processing facility. The stock has provided a total return (increase in its share price) of 50% since its listing on Aug 3, 2020.”

The largest IPO of the year was that of rebar manufacturer Agha Steel, which raised money for its phase-II expansion wherein the company planned to bring state-of-the-art Mi Da rolling mill.

“The company offered 120 million shares at a strike price of Rs32 per share (floor price Rs30 per share), raising Rs3.8 billion. Agha Steel has provided a total return of 15% since its listing on November 2, 2020.”

TPL Trakker is focused on providing technology solutions and IoT services. It raised Rs802 million by offering 66.82 million shares at a price of Rs12 per share (fixed price). “The stock has lost 17% of value since its listing on September 21, 2020.”

Engro Polymer and Chemicals Limited offered preference shares of Rs3 billion to investors (87.5% offered to pre-IPO investors) to finance its PVC and VCM expansion through equity to avail tax credits under Section 65E. “The stock is not yet listed at the exchange.”

Among the 14 companies that issued right shares in 2020, Fauji Fertiliser Bin Qasim fetched the highest amount of Rs5 billion, followed by The Searle Company’s right shares of Rs4.7 billion and Unity Foods’ right shares of Rs4.5 billion.

The amount raised through the right shares issue declined 12% in 2020 compared to 2019.

Published in The Express Tribune, December 24^th, 2020.

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