Following a successful book-building exercise aimed at attracting institutional investors and high-net worth individuals, the initial public offering (IPO) of Engro Fertilizers is about to enter its final phase where general public will subscribe to the stock at the price of Rs28.25 a share.
“The IPO of Engro Fertilizers is the best investment opportunity ever,” AKD Group Chairman Aqeel Karim Dhedhi said while speaking to The Express Tribune recently.
Along with Next Capital, AKD Securities is the book-runner for the issue. The general public portion of the IPO will consist of 25%, or 18.75 million shares, of the total issue size of 75 million ordinary shares.
“Within the first 10 days of its trading, the share price of Engro Fertilizers is expected to soar to Rs33,” according to AKD Securities CEO Muhammad Farid Alam. “Eventually, the share performance depends on the availability of gas as well as the rate at which the company gets it,” he added.
With the establishment of a 1.3-million-ton, state-of-the-art fertiliser complex in 2011, the company’s annual urea production capacity stands at 2.3 million tons, which is equal to one-third of the country’s total urea production capacity.
Engro Fertilizers has been in trouble due to unavailability of natural gas, which resulted in a net loss of Rs2.9 billion at the end of 2012. This is despite the government’s pledge to provide the company’s Deharki plant with gas at a price of $0.75 per million British thermal units (mmbtu).
Elixir Securities CEO Junaid Iqbal says his brokerage house anticipates the share price will increase to Rs54 per share in the best-case scenario in which both plants of the company receive promised gas supplies. In the worst-case scenario, wherein one plant remains shut, the stock price may drop to as low as Rs24 per share.
“Although one can’t be sure about it, it seems that the present government will honour its commitment,” Iqbal remarked about the possibility of the company getting natural gas at the subsidised rate.
According to Global Securities research analyst Imran Ahmed Patel, investment in Engro Fertilizers will offer a return better than Engro Corp in the short term at least.
“A lower free float, coupled with a huge interest in the IPO, is likely to drive the share price up in the short term, presenting an opportunity for some quick gains to the investors,” Patel said.
But given the fast-depleting gas reserves in Pakistan, does it even make sense to invest in a fertiliser company? After all, industry experts believe that domestic natural gas production, after peaking in 2014, will start declining and is expected to be less than 2,400 mmcfd in 2021.
Speaking to The Express Tribune, Engro Corp former president Asad Umar said although he is out of touch with the current state of affairs at the company, he believes the new plant will generate impressive profits even if it uses imported gas instead of relying on local gas supplies.
Umar has said in the past that the company is willing to import LNG in case the government fails to provide natural gas at the promised subsidised rate. In that case, Umar said, the company must ensure that it is allowed to either export its product to Indian Punjab or sell the same to domestic farmers at a price that is globally competitive.
According to KASB Securities research analyst Shagufta Irshad Khurram, Engro Fertilizers is her brokerage house’s ‘top pick’ in the fertiliser industry because it is the only company with an ‘embedded growth angle’.
“We expect Engro Fertilizers to report three-year earnings per share with cumulative annualised growth rate of 21%, emerging from volumetric growth with improved gas supply in 2015 and de-leveraging of balance sheet,” she said.
Published in The Express Tribune, December 4th, 2013.
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COMMENTS (22)
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i was informed that ur certificate will delivered to ur account maintaining branch upto 16 Jan, 2013 but I have not received yet.
I had purchased 1500 shares and received email that u will get ur owner certificate from ur acount maintaining branch on 16 Jan, 2013. I visited the branch on 20 Jan but branch manager said that we have not received yet. kindly update me.
I have applied for 1000 physical shares in engro fertilizers IPO .. Will they dispatch the share certificates to the bank or my home address, And when ?
@Yasir Hasan: You will be receiving the shares in your CDC account ,or by mail on or before 15-1-2014
Allotment have been completed. All 500 & 1000 shares application have been accepted, while balloting carried out on 1500 shares application. ...successful applicants will receive their share certificate within two weeks, while unsuccessful applicants can check with their banks for money returned
The Engro Fertilizer Shares may be beneficial in Long Terms but in short terms surely not... Don't mix it with Engro Shares..
@M.Asad: you can contact me at given email address...
Dear Please let me know when will result announce of Engro Fertilizer Ltd Shares which I submitted on 16 dec 2013.
Sir, I want to take shares in your firm, may I know how I can obtain shares? Kindly let me know the procedure for obtaining it.
Any idea can engrow fertilizers share benefit?
It's the first time that I have filled a Share application. How long does it take to get the results normally? where will I get it? :)
is it beneficial
i just want to know can i submit an application for the engro iop , without having any CDC account, and how can i get share and then sale them in the absence of CDC account?
Is it good time to invest in engro ???
IPO dates are too short
IIPO dates too shoot
IPO dates are too shot
@Question: 16 to 17 Dec
I think Engro made a big mistake by investing huge money around 1billion $ in a large fertilizer plant. Looking at the siutation of gas in the country, for next decade it seems very difficult that its both plants will keep running. Security situation of country plays a vital role in it also, as we are not able to explore new reserves of gas and continously depleting existing ones. Demand is increasing day by day as population is increasing at a fast rate where as supply is reducing.
Any idea what the dates for the IPO are?