PSX raises Rs835b for govt, corporates

Emerges as an alternate to traditional banks; lists five IPOs in 2024

KARACHI:

The Pakistan Stock Exchange (PSX) has solidified its position as a dynamic capital market, emerging as an alternative to traditional banks for both the government and private sector to raise capital and debt. In 2024, equity and debt financing on the exchange totalled an impressive Rs835 billion.

Businesses turned towards the bourse for capital following a resurgence in economic activity and stabilisation, renewing their confidence to expand production. In contrast, economic overheating in previous years had led many companies to delay expansion plans, waiting for favourable conditions.

According to a breakdown of data from Arif Habib Limited (AHL), PSX welcomed five new companies to its main trading platform and two to the Growth Enterprise Market (GEM) Board in 2024. These seven firms raised a total of Rs8.43 billion in equity by offering shares to corporate and individual investors through initial public offerings (IPOs).

In addition, the bourse also facilitated 10 listed companies in raising another Rs18.35 billion by issuing right shares to existing shareholders this year.

The debt market at PSX also saw significant development, with the government raising domestic debt totalling approximately Rs800 billion through PSX for the first time in history. This alternative to bank borrowing allowed the government to secure debt at rates 1-2% lower than those from conventional banks.

Four listed companies also issued debt worth Rs8.56 billion at PSX this year, according to data reported by the research house.

AHL noted in its commentary that the IPO market in Pakistan witnessed substantial growth in 2024, driven by an improved economic landscape and strong stock market performance.

"Key macroeconomic indicators, including a downward inflation trajectory, monetary easing, currency stability, and the successful negotiation of the $7 billion International Monetary Fund (IMF) Extended Funding Facility (EFF), have created an attractive environment for equity offerings, drawing investor interest and bolstering capital-raising activities on the Pakistan Stock Exchange (PSX)," the report said.

The PSX benchmark KSE-100 Index surged 42.4% to over 90,000 points in 2024, reflecting overall positive sentiment and renewed investor interest. Additionally, the profitability of the top 100 companies in the index skyrocketed 24.4% during FY24 to a historic Rs1.6 trillion.

Positive momentum in the stock market encouraged companies to seek capital through public equity offerings. A total of five IPOs took place on the main board and two on the GEM Board this year, compared to just one IPO last year.

New listings on the main board in 2024 included Secure Logistics (SLGL), TPL REIT Fund-I (TPLRF1), International Packaging (IPAK), Fast Cables (FCL), and BF Biosciences (BFBIO). Meanwhile, Mughal Energy (GEMMEL) and Burj Clean Energy (GEMBCEM) joined the GEM Board.

"Capital raised via IPOs this year reached its highest level since 2021, underscoring strong demand for new investment opportunities," the research house noted.

Total demand for IPOs in 2024 reached Rs13 billion, with Rs8.43 billion raised, reflecting a 1.6-times oversubscription.

Additionally, four companies were listed on PSX through mergers, up from three last year. These include Stylers International, LSE Capital, UDL International, and Big Bird Foods.

A seasoned banker told The Express Tribune that the government raised Rs800 billion by issuing Sukuks on PSX for the first time in history.

He recalled that the first Sukuk auction, a Shariah-compliant bond, took place in December 2023. Since then, the issuance of Sukuk through PSX has become a recurring feature of the market.

The PSX has enabled the government to secure debt at 1-2% lower costs by offering Sukuks to corporate and individual investors, compared to borrowing from conventional banks.

This move aligns with Pakistan's broader goal of transforming its financial system to a fully Shariah-compliant model by January 2028.

The banker further noted that the government is expected to raise another Rs400-500 billion by issuing additional Sukuks in the final two months of the year.

Currently, the government's total outstanding borrowing through Sukuks on PSX stands at Rs5 trillion.