KARACHI, Dec 26: PICIC Energy Fund (PEF) is to make its Initial Public Offering (IPO) of shares valuing Rs250 million (plus green shoe option of Rs500 million) on Dec 28-29 (Wednesday-Thursday).

PICIC Asset Management Company Limited (PICIC AMC) is launching this closed end fund which is described as the first fund dedicated to a specific sector. According to the prospectus, the fund is being established with a focused objective of capturing the significant potential of the domestic listed energy sector, which comprises four listed sectors, namely: Oil & Gas Exploration; Oil Gas Marketing; Power Generation and Distribution and Refineries.

First Capital Securities in its research report observes that adding up all the listed companies in above-mentioned sectors, PEF would have the choice of investing in 28 listed companies. 70 to 80 per cent of the fund was likely to be allocated to equity securities and the remaining to be utilized to capture gains from other segments of financial market. Out of the total capital of Rs1 billion, certificates amounting to Rs750 million have already been subscribed. If the green shoe option of Rs500 million is fully exercized, total paid-up capital would increase to Rs1.5 billion, while public holding of units would increase to Rs750 million (50 per cent).

Capital One Equities in its report stated that the share of those sectors in which the Fund would invest, constitute 37.49 per cent of the total market capitalization of KSE at December 22, 2005. According to analysts, this energy fund was likely to provide retail investors an opportunity to access some of the high priced yet undervalued blue chip stocks, especially in the oil & gas sector at a relatively low price.

Analysts at InvestCap mention that quite a few companies on those sectors are up for privatization. PSO, PPL are already at advanced stages of privatization; SNGPL and SSGC are in early stages of sell-off; KESC is a newly privatized entity with the benefits of privatization yet to accrue to shareholders and further stake in OGDCL was being offloaded in the foreign and domestic markets.

Analysts at Live Securities pointed out that by virtue of being dedicated towards the energy sector; the regulators have relaxed certain restrictions applicable to mutual funds in general. For PICIC Energy Fund, the 10 per cent maximum limited of investing in a single security has been relaxed to 15 per cent. The 25 per cent maximum limited for investing in a particular sector has been relaxed to 35 per cent.

Out of the total size of the fund at Rs1 billion, Rs550 million have been invested by the pre-IPO investors and Rs200 million have been placed by the investment adviser. For the upcoming IPO, investors ought to make their own decisions on whether or not to subscribe, after a thorough study of the offering document and weighing the pros and cons.