Can maker looks to raise Rs3.3b through IPO

Pakistan Aluminium Beverage Cans to offer 26% stake to investors

KARACHI:

Pakistan’s only can maker has announced plans to raise at least Rs3.3 billion through the Pakistan Stock Exchange (PSX) by offering its 26% stake to investors.

Pakistan Aluminium Beverage Cans (PABC) will offer 93.8 million ordinary shares to the institutional and ordinary investors in an initial public offering (IPO) next week.

Shares would be offered through the book-building process on June 22 and 23 at a floor price of Rs35 per share, said a statement issued by the company on Friday.

Successful bidders would provisionally be allotted only 75% of the issue size and the remaining shares would be offered to retail investors at the strike price, it said.

“Beverages sold in aluminium cans account for only 3.6% of total soft drink sales in Pakistan compared to the global average of almost 20%,” said PABC CEO Azam Sakrani in comments to The Express Tribune.

“The low proportion gives us a lot of opportunity to grow our business.”

He stressed that young and rapidly urbanising population with steady purchasing power was likely to consume a higher amount of carbonated beverages, which would boost the business of drink companies and their suppliers.

The funds to be raised through book building and IPO will go to Ashmore, a lead investor who has planned to exit the company, it has been learnt.

“We are increasing our rated capacity from 700 million cans to 950 million cans per annum. We will complete this expansion by July 2022,” the PABC CEO said.

The expansion is being financed through the State Bank of Pakistan’s (SBP) Long Term Financing Facility (LTFF) at an attractive rate of 3% (including the bank margin of 1%).

PABC has assets of over Rs10 billion and annual revenue of Rs5 billion.

In its third year of operations (2020), the company produced and sold 444 million cans to local and foreign bottlers against the effective capacity of 600 million.

Domestic demand for cans currently stands at 275 million.

“I think we can easily increase our penetration from 3.6% to 5-6% by 2025 and this will lift volumetric sales to around 650 million cans, reflecting annualised growth rate of 19%,” he said.

Given the fact that can imports were virtually non-existent in Pakistan owing to high freight costs and duties, PABC would benefit from the expected rise in can penetration, he said.

He pointed out that a similar growth trend was witnessed in countries like Brazil, Nigeria, Russia and Vietnam.

PABC supplies aluminium cans to the producers of all major carbonated drinks in Pakistan including Pepsi and Coca-Cola. Moreover, he highlighted that can exports to Afghanistan by the company had a 35% share in total sales last year.

Sakrani termed Afghanistan a bigger market than Pakistan for beverage cans as it did not have local beverage glass manufacturing facilities.

Owing to widespread campaigns discouraging the use of plastic, many companies are now investing in aluminium cans for drinks.

“In a short span of time, the company managed to eliminate Pakistan’s need to import beverage cans,” said lead manager to IPO Arif Habib Limited CEO Shahid Ali Habib.

“It has not only turned Pakistan self-sufficient in cans, but has also generated foreign exchange by exporting merchandise to Afghanistan, Tajikistan and the US.”

PABC would be the fourth IPO of current year and would be the largest IPO for the year, he said.