KARACHI, Jan 12: The board of directors of Nishat Mills Limited in their meeting last week approved the divestment of up to 15 per cent of its shareholding in Lalpir Power Limited as part of divestments by the sponsors of Lalpir Power.
The stock would be offered for sale to the public through an Initial Public Offering (IPO) and the power plant would go on to be separately listed on the Karachi and Lahore stock exchanges subject to the requisite regulatory and other approvals.
Nishat Mills Limited (NML) did not disclose the offer price in its announcement. The company holds 110 million shares in Lalpir Power, which works out to 32 per cent stake. The 15 per cent divestment of its stake, therefore, translates into 16.5 million shares.
Among other Nishat Group Companies, Adamjee Insurance holds 8 per cent or 27.6 million shares in Lalpir. “We expect the entire exercise to be similar to Nishat Group's listing of Pakgen Power in June 2011,” says analyst Fahd Niaz at KASB Securities.
The market appetite to absorb a new offering is believed to be ‘decent’ given that exposure in Independent Power Plants (IPPs) is encouraging in the current macro scenario, such as the currency devaluation and lower interest rates.
Lalpir power formerly known as AES Lalpir started commercial operations in November 1997. The oil fired power plant having a gross capacity of 362MW was partially acquired (32pc of total shares) by NML in Dec-2009.
“Such an acquisition proved quite fruitful to the textile company as the IPP declared dividend per share of Rs5.50 in FY12 translating into an earning per share (eps) of Rs1.56 in NML’s accounts contributing 15 per cent to the total eps of Rs10.04 in FY12,” says Abdul Azeem, analyst at InvestCap.
In the absence of divestment price disclosure, analysts at several brokerage houses came up with their own analysis. "The implied price range for Lalpir works out at Rs13.92 to Rs44.57 per share", KASB calculated.
InvestCap observed: “Lalpir Power is valued at Rs16.49 per share on NMLs balance sheet in FY12. However, the company claims independent valuation of the asset at Rs25.95 per share. “In the absence of any further details regarding IPO price by the management our sensitivity analysis provides the possible eps impact of the IPO at three different price levels namely Rs25, Rs30 and Rs35.”
"Following NML’s decision, we expect high probability of other sponsor companies to announce similar divestment moves", predicted KASB research team.
