Proposals invited: Engro Corp considering secondary offering

Could offer up to 10% of its fertiliser business.

KARACHI:

Engro Corporation is considering a secondary offering of up to 10% of its fertiliser business, The Express Tribune has learned.

One of the largest conglomerates operating in Pakistan, Engro Corporation holds 87% shares in Engro Fertilizers. With a 32% share, Engro Fertilizers is the second largest player in the country’s urea market.

“We have invited proposals for the secondary offering. We expect to carry out the transaction in the first quarter of 2015,” Engro Corporation Chief Financial Officer Naz Khan said in an email on Thursday.

With regard to the estimated size of the public offering, Khan said market forces will decide the eventual price of the share issue. “The current outstanding shares of Engro Fertilizers are approximately 1.3 billion. A 10% share issue at the current market price, if floated in its entirety, will yield close to Rs8.5 billion,” she noted.

The company official refused to reveal the name of the investment bank that is going to underwrite and/or manage the transaction. However, market sources claim AKD Securities, which has managed and/or underwritten a majority of offerings in recent years in the Pakistan market, is going to lead the upcoming sale of shares by Engro Corporation.



Engro Fertilizers went public in January when it issued 75 million ordinary shares in an Initial Public Offering (IPO) consisting of book-building and general public portions. The share price of Engro Fertilizers at the close of trading on Thursday was Rs65.77. It has gone up 132.8% since its listing on January 17.

Engro Fertilizers’ net profit for the first nine months of 2014 was Rs5.5 billion, up 70.4% from a year ago.

“It was always our intention to list Engro Fertilizers and put out a certain amount of float in the market,” Khan said. Under stock exchange regulations, the company must have at least 25% of the float in the market over a period of time. Khan says the share issue will help Engro Fertilizers comply with the regulations because the company currently has only 13% float in the market.

“It will also help monetise our investments and redirect the capital towards our other projects,” she added.

The current year has seen a flurry of public offerings mainly because of increasing investment appetite for IPOs among institutional investors. According to Topline Securities, the number of total public offerings in 2014 will be 10 as opposed to only three in 2013.

The benchmark index of the Karachi Stock Exchange is hovering around 31,700 points after a bull run that started in the beginning of 2012.

Khan believes more capital will be directed towards the equity market given the bearish outlook on inflation and the expected lower interest rates.

“In terms of timing, this seems to be an appropriate time to go ahead to raise equity from the market,” she said.

Published in The Express Tribune, December 12^th, 2014.

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