IPO: Hi-Tech Lubricants looks to expand through retail side

Company recently issued 29m shares to raise capital for 300 car care centres

LAHORE: Pakistan’s capital market has observed some healthy signs in the last couple of years, as some companies have opted to go public in order to raise capital for their business growth.

The performance of companies listed at the bourse indicates the demand of new Initial Public Offerings (IPOs) by investors and financial institutions.

Hi-Tech Lubricants is going to be one such company, as it has recently listed itself at the bourse by issuing around 29 million shares.

The need to get listed by the management of the company is linked with its ambitious plan to start its own retail spots all over Pakistan to further penetrate the market.

Hi-Tech Lubricants, which claims to have an overall market share of 7% in the lubricants market, is now looking to move forward and achieve over 10% market share by 2020.

“Unlike other oil marketing companies, we don’t have our retail centres, which we believe is a must these days,” said High-Tech Lubricants Chief Executive Officer Hassan Tahir, while talking to The Express Tribune.

“The idea is to establish at least 300 car care centres, and since it is not a low cost project, the management has decided to raise capital through an IPO to further expand our market,” he added.

Tahir was of the view that the sale of lubricants by different oil companies through their own retail outlets is merely 3%; the rest is done by the secondary market. Still, the centres create an image of the brand in customers’ minds and play a vital role to enhance market share.

The company initially plans to establish around 75 centres, mostly in urban cities at first.

It expects to raise Rs1.6 billion, at an expected price of Rs55 per share, from the IPO.

Overview

The company established back in 1997, with the name of Hi-Tech Lubricants partnership, and has been importing and selling synthetic lubricants. Since then it has managed to build a network of around 100 distributors.

In 2011, the company was bought over by Hi-Tech Private Limited and was converted into a public unlisted corporate.

For the past five years, the company has been showing a compound average growth rate of 24%. “In the year 2015, the total sales of the company were recorded at Rs5.4 billion, whereas by 2020, we are looking to increase its sales volume to Rs14 billion,” noted Tahir.

As per Tahir, Hi-Tech Lubricants is leading the passenger car oil market segment with a share of 16%.

“It is doing well in diesel engine oil, however, the motorcycle oil segment has huge  potential which cannot be fulfilled by all companies,” he added.

The company is now focusing on motorcycle oil as well as heavy machinery segment in its new plant that is expected to start production in early 2016.  

Published in The Express Tribune, September 25^th, 2015.

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