IPOs become scarce in 2011

Engro Foods raises the most capital from the four.

KARACHI:

The Karachi Stock Exchange registered only four new entrants through public offering in 2011, a year when trading activity dropped to levels last seen in 1998.

The four initial public offerings (IPOs) raised a cumulative sum of Rs1.4 billion compared with last year’s Rs3.3 billion through six listings, according to a JS Global Capital research note. The cumulative sum dropped 58% in the outgoing calendar year.

Historically, 2005 was the best year when 17 IPOs were up for grabs.

Moreover, investors general lack of interest was also reflected in the number of applications filed which totalled only 12,000 against the required number of 203,000. Engro Foods received the highest response while International Steel received the lowest.

Engro Foods still failed to raise the target amount from the general public. Engro Corporation’s second most profitable subsidiary offered shares worth Rs675 million and received Rs640 million worth of offers from the general public. The remaining shares were most likely acquired by the firm’s underwriter, an investment bank or a financial institution that guarantees the purchase of shares if the entire IPO is not subscribed by the general public.

JS Global Capital expects a similar dull trend to persist for public offerings in 2012 owing to slow economic activities and lack of general interest of investors. Looking ahead, offerings by Engro of its fertiliser and power businesses appear strong possibilities in 2012.

Published in The Express Tribune, December 8^th, 2011.