Lalpir Power’s IPO already a roaring success

Nishat Group company creates excitement in the book-building phase alone.

KARACHI:

When Mian Muhammad Mansha – chairman of the powerful Nishat Group conglomerate – decided to fly to Karachi two weeks ago just to present a preliminary document of the ‘offer for sale of shares’ in Lalpir Power to the bigwigs of the Karachi Stock Exchange (KSE), he seemed to already know that the decision to list Lalpir would be a roaring success.

And a roaring success it has been: the book-building portion of the offer for sale of shares in Lalpir Power has been oversubscribed by 5.9 times, a notice sent to the KSE on Thursday revealed.

Lalpir Power is an independent power producing company owned by the Nishat Group. It employs an oil-fired power station in Muzaffargarh, Punjab, to produce electricity with a gross total capacity of 362 megawatts.

The offer for sale of shares consisted of 37.9 million ordinary shares – or 10% of the total paid-up share capital of Lalpir Power – at an offer price of Rs15 per share (inclusive of a premium of Rs5 per share).

Speaking to The Express Tribune, AKD Securities Vice President for Investment Banking Syed Khurram Shahid said the fact that the offer was oversubscribed by 5.9 times means the company has potential for growth in the eyes of institutional investors.

AKD Securities, along with Next Capital, is serving as arranger and book runner for this offer.

The offer is divided into two parts: for the general public and for book-building. The book-building exercise took place on June 18 and 19, which will now be followed by public subscription.

The recently concluded book-building portion of the offer consisted of 28.4 million ordinary shares – or 75% of the total offer size of 37.9 million ordinary shares – at a floor price of Rs15 per share. The book-building process allows only institutional investors and high net-worth individuals to bid for a specific number of shares at various prices.

AKD Securities and Next Capital received 390 bids for 169.3 million ordinary shares, against the offer of 28.4 million ordinary shares.

Shahid said the offer’s book runners have determined the cut-off/strike price of Rs22 per share through the Dutch Auction Method, an auction structure in which the price of the offering is set after taking all bids and determining the highest price at which the total offering can be sold.

“We’re expecting that public subscription will be held within two weeks,” Shahid said, referring to the general public portion, which will consist of the remaining 25% of the total offer size.

He added that the public will have an opportunity to buy shares in Lalpir Power at a price equal to, or at a discount to, the price determined through the book-building process, which is Rs22 per share.

“It’s up to the sponsor whether it wants to sell them at the price of Rs22 per share or wants to offer a discount to the public,” he observed.

It should be noted that unlike the book-building portion, the upcoming general public portion comes with a ‘green shoe option’, which means that an additional 18.9 million ordinary shares – another 5% of the total existing paid-up capital of Lalpir Power – can be offered to the general public in case of oversubscription.

“I expect that the offer to the general public is also going to be oversubscribed,” Shahid said, while referring to the possibility that the 9.4 million ordinary shares offered to the general public at Rs22 per share or less may fall far short of demand.

“If this offer is also oversubscribed, the sponsor will have the option to sell another 5% of the paid-up capital of the company,” he said, noting that the price of shares offered under the ‘green shoe option’ will remain the same, should the sponsor choose to avail this option.

Published in The Express Tribune, June 21^st, 2013.

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