The company’s management said that they planned on issuing an American Depository Receipt (ADR) - an instrument that allows American investors to trade a foreign-listed stock on American exchanges - and had already retained the services of Bank of New York Mellon for underwriting services. BNY Mellon is a New York-based asset management company that is the largest custodian for ADRs.
The company did not specify the amount that they planned on raising from the American equity markets, suggesting that the plan was in its early stages, leading some analysts to comment that the firm’s December 2010 target date for such a listing was optimistic at best.
“The target date seems ambitious,” said Omar Rafiq, research analyst at BMA Capital, an investment bank, in a research note issued to clients on Monday. “The appetite (for new listings) in the international equity markets is weak... it will be beneficial for the company to pursue the (listing) only when commercial production from all its plants is in full flow.”
ADRs are a negotiable certificate issued by a US bank representing a specified number of shares (or one share) in a foreign stock that is traded on a US exchange. ADRs are denominated in US dollars, with the underlying security held by an American financial institution overseas.
ADRs help to reduce administration and duty costs that would otherwise be levied on each transaction. However, ADRs do not eliminate the currency and economic risks for the underlying shares in another country. For example, dividend payments in rupees would be converted to US dollars, net of conversion expenses and foreign taxes and in accordance with the deposit agreement.
Danish engineering firm acquires a stake
The firm also announced that the Danish catalyst manufacturer, Haldor-Topsoe, was joining the board of directors on account of having participated in the company’s initial public offering on the Karachi Stock Exchange. The Danish firm has previously worked with the Fauji Fertiliser Company with some of the technical aspects of their operations. The precise amount owned by Haldor-Topsoe was not immediately available.
Haldor-Topsoe specialises in the production of heterogeneous catalysts, an important element in the manufacturing process of fertilisers and petrochemicals. The firm also specialises in advising its clients on the design of process plants based on catalytic processes.
The assistance of the Danish firm should help Fatima Fertilizers ease the difficulties that they have been having in getting their production capacity online on time.
Production delays
Fatima Fertilizer Company is the first company to attempt to become a one-stop shop for all sorts of different fertilisers from its very outset. While it is currently only producing urea and CAN (fertilisers that consist of calcium, ammonia and nitrates), it plans on launching production in NPK fertilisers (those that consist of nitrogen, phosphorus and potassium) by the first quarter of the next calendar year.
The company’s stock closed on Monday at Rs12.21, up 2.86 per cent on the Karachi Stock Exchange.
Published in The Express Tribune, June 29th, 2010.
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