15 May 2004	Saturday	24 Rabi-ul-Awwal 1425

KARACHI, May 14: Seizing the opportunity of an unprecedented bull run at the stock market, increasing number of companies are asking shareholders for cash in right issues.

Among the 13 companies that are currently making the cash call, The Resource Group Pakistan Limited (TRG), has proposed to raise a staggering sum of Rs1,440 million through the right issue at the highest 200 per cent (two-for-one).

The TRG right issue has been fully underwritten by ABAMCO Composite Fund together with its sister concern JSCL. Sized at Rs 3 billion, the ABAMCO Composite Fund has been billed as Pakistan's largest private sector mutual fund.

The Fund has launched an Initial Public Offering (IPO) of Rs1 billion with the issue open for public subscription for two days: Friday and Saturday (May 14 and 15).

The share in TRG, which is currently trading at 150 per cent premium or Rs25 a share, is being offered at the par value of Rs10 to its shareholders. Market believes that most shareholders in TRG are unlikely to pass over the opportunity of answering to the company's call for cash. But any unsubscribed portion would be picked up the underwriters, which would be a lucrative investment for ABAMCO Composite Fund as it begins to build up its portfolio.

A press release issued on Friday by ABAMCO Limited-the management company of ABAMCO Composite Fund- said that the Fund had already started formulating and strategizing deployment of its assets. "The Fund is looking to acquire a 10 per cent stake in three companies, which will give it representation on the company's respective boards of directors," the press statement said and added that negotiations were already under way with those companies. The names of companies were, however, not disclosed.

Meanwhile, in a press release issued by TRG Pakistan Limited on Friday, the company's Executive Director Mr Ali Jameel contended that the subscription to TRG's right offer would "provide gains to bargain hunters as well as investors looking for additional exposure in the technology enabled service sector."

The executive director said that the company was engaged in capturing the opportunity of low wage staff and the recent steep decline in telecommunications cost by acquiring outsourced call centre companies in the US and then migrating a significant portion of their service delivery and administration expenses to its offshore facility in Pakistan.

He also said that the concept of labour arbitrage between US and Pakistan was believed to entail cost benefits. Furthermore, the enterprise profitability could be enhanced manifold on account of availability of a work force in Pakistan that was cheaper and had a low turnover cost as compared to the workers working in the US Call Centre Industry.

"Proceeds of the right issue will be utilized to fund future acquisitions in the US business services companies as well as for further development of its Pakistan-based infrastructure," Mr Ali Jameel was quoted to have said.

Other companies waiting in the wings with their proposed right offers include: Beema Pakistan - 21 per cent; Pakistan General Insurance - 33.33 per cent; Emco Industries (at discount of 50 per cent) - 33 per cent; Latif Jute Mills - 25 per cent; 1st Capital Mutual Fund (at discount of 30 per cent) - 100 per cent; Islamic Investment Bank (at discount of 25 per cent) - 133.33 per cent; Crescent Leasing Corporation (at premium of Rs5) - 35 per cent; Islamic Investment Bank (Redeemable Preference shares) - 5 per cent; Askari General Insurance (at premium of Rs2) - 25 per cent; Safeway Mutual Fund (at premium of Rs5)- 150 per cent and Ali Asghar Textile Mills (at discount of 40 per cent) - 100 per cent.

But for sponsors of weaker companies, right issues are also fraught with danger. A couple of years ago, the sponsors of Pak- Apex Leasing Company attempted to reach target of Rs200 million in paid-up capital via the right offer. They, however, ended up relinquishing the management and control to the underwriters of the right offer - the brokerage firm, Khadim Ali Shah Bukhari Limited (KASB), which picked up the majority shares when the shareholders subscribed to only 13 per cent (Rs10.4 million) of the Rs80 million worth of shares on offer. Including the discount of Rs13.91 million, KASB had picked up Rs83.5 million worth of the Rs200 million fully-diluted equity, making it the majority equity holder. Pak-Apex Leasing was then re-named as KASB Leasing Limited, which now stands merged with KASB Bank Limited.