SSGC plans IPO for LPG subsidiary
Sui Southern Gas Company (SSGC) has announced plans to list its subsidiary, SSGC LPG, on the Pakistan Stock Exchange (PSX) in the future. This move aims to facilitate new financing for ongoing and upcoming projects by offering shares to the general public.
In a notification to the PSX, the gas utility firm stated that the board of directors of Sui Southern Gas Company Limited (SSGCL) has approved "the conversion of the status of SSGC LPG (Private) Limited from Private Limited to a Public Limited Company." This approval is granted to initiate the process of issuing 33.33 million ordinary shares of the converted company through an initial public offer (IPO) at an opportune time in the future.
SSGC LPG has been actively involved in marketing and distributing liquefied petroleum gas (LPG) across Pakistan since 2012. The subsidiary operates under the management of an autonomous board of directors.
In a related development, Topline Research reported that the Pakistan market (PSX) witnessed only one IPO in 2023, raising a modest amount of Rs435 million. This marks the lowest fundraising in a year in the past decade and is half of the previous record low of Rs800 million observed in 2013.
Regarding the number of IPOs, PSX has experienced a single IPO for the second time since 2019, a significant deviation from the previous five-year and ten-year averages of four IPOs per year.
“We attribute this poor IPO trend to macro-economic instability, coupled with the looming threat of default, cheap valuations, and political uncertainty discouraging equity investment.”
The sole IPO in 2023 was Symmetry Group on the main board, Pakistan's first publicly listed digital technology company focusing on the digitalisation of consumer-centric functions. The company offered 101.24 million shares at a strike price of Rs4.3/share, raising Rs435 million in August 2023 with an oversubscription of 1.58 times.
Read: PSX prepares for 'largish IPO' as high interest rates loom
Globally, a similar trend of drying up IPOs has been observed, with 968 IPOs raising $101 billion in the first nine months of 2023 compared to 1,018 IPOs raising $148 billion in the same period last year. This decline is attributed to rising macro challenges, tighter liquidity, and a higher cost of capital.
In the first half of 2023, the benchmark KSE-100 index rose by only 3% in Pak rupees but declined by 19% in US dollars. The average daily traded volume was 163 million shares, with an average daily traded value of Rs6 billion. However, in the second half of 2023 to date, the index witnessed a sharp recovery, rising by 51% in Pak rupees and 52% in US dollars. The average daily traded volume in the cash/ready market improved to 377 million shares, with Rs12 billion.
“We believe this positive sentiment, if maintained, is likely to be capitalised by companies wishing to access external capital, leading to an uptick in companies applying to be listed on the PSX in 2024."
Pakistan recently introduced a shorter IPO process, imposing a 14-working-day limit for granting regulatory approval to the listing application and prospectus by the SECP. Additionally, there is a 15-day limit on PSX for the post-approval procedure for listing. This standardisation is expected to facilitate more companies raising funds through IPOs in 2024.
Published in The Express Tribune, December 7th, 2023.
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