On the face of it, there appears to be little in common between print media and a fruit and vegetable exporting and packaging company. Yet, the founders of ‘Urdu Digest’ launched Roshan Enterprise in 1989.

“The Enterprise is Pakistan’s leading exporter of fruits to the Middle East, Central Asia, US and Europe with an annual turnover of Rs1.2bn”, the chief executive officer (CEO) of Roshan Packages, Tayyab Aijaz, told this writer last Wednesday. In 2002, the group launched ‘Roshan Packages Corrugation’ and added ‘Roshan Packages Flexible’ to the company in 2011”.

Roshan Packages Limited (RPL) has grabbed the spotlight as it took the lead as the first — from among the probable seven private companies — to enter the Pakistan Stock Exchange in 2017. RPL stock may begin trading after the usual gong ceremony on Feb 28.

In mid-January, RPL set out to raise Rs1.14bn through the offer of 32.5m shares at the floor price of Rs35 per share. Three-quarters or 24.375m shares were for the book building portion while the remaining 25pc of the issue (8.125m shares) was offered to the general public in an Initial Public Offering (IPO).

“In the book building process, the company received a subscription of Rs5.8bn, against a requirement of Rs853m, representing oversubscription by 6.8 times”, says Shahid Ali Habib, CEO Arif Habib Ltd, the Lead Manager and Book Runner to the issue. He also claims that it was the first ever Book Building with participation from more than 1,246 ‘High Net worth Individuals’.

Roshan Packages Limited has grabbed the spotlight as it took the lead as the first — from among the probable seven private companies — to enter the Pakistan Stock Exchange in 2017

The book building closed at a strike price of Rs86.25 per share, which was at a 146pc premium to the floor price of Rs35 per share. The IPO opened for subscription on Jan 30-31 and fetched Rs734m at the strike price, representing oversubscription by 6.8 times the public offer.

The CEO of Roshan Packages Limited says that Pakistan’s packaging industry is valued at Rs55bn, growing at an annualised rate of 17pc since 2003. 50pc of the pie is taken up by the organised sector, while the cottage industry has a share of 45pc with 5pc of the gap filled by imports.

The cottage industry is unable to meet the requirements of corporations and export-oriented clients. Fast moving consumer goods (FMCGs) are the biggest consumers of packaging products followed by fruit suppliers. RPL sales to FMCGs have grown rapidly over the last six years while fruit sector sale is about steady.

RPL has two principle product categories: Corrugated boxes for packaging consumer products, fruits, textiles, electronic appliances, pizzas etc. and flexible wrappings for confectionary, biscuits, snacks, ice-creams, detergents and wrapping labels for PET bottles.

In the corrugated boxes market, RPL commands a leading position (11pc) of the market share, second only to Packages Limited which has a 29pc share. In the flexible products market also the company, with an 18pc share, is second to Packages’ 54pc share.

The company has two primary manufacturing plants in Sundar-Industrial Estate, 40km out of Lahore and employs 680 people. In the latest FY2016, RPL earned profit after tax at Rs262 on a turnover of Rs3.62bn. Total assets of the company stood at Rs5.14bn and shareholders’ equity at Rs2.43bn.

The company stepped into the equity market to mobilse funds to finance the ongoing expansion of its Corrugation Plant capacity which is to be doubled to 60,000 from 30,000 metric tonnes by the 4Q2017 and Flexible Plant capacity to 12,240 from 10,800 metric tonnes by 4Q2017. “RPL will complete expansion of both plants by end of FY 2017”, the CEO affirmed.

Shares of RPL are primarily held by the Aijaz family. The equity offering proceeds were targeted at Rs1.138bn, of which Rs912m were to be spent on expansion; Rs125m for paying off short-term borrowings incurred as part of expansion and Rs100m to fund working capital.

Expansion of the corrugation plant requires Rs933m while that of flexible plant requires Rs1.401m, making an aggregate of Rs2.335m. The company will raise Rs1.198bn through internal funds and supplier’s credit for expansion.

“Roshan Packages in participation with Chinese investors is in the process of establishing a dedicated corrugated paper mill for backward linkages of its corrugated plant”, CEO Tayyab Aijaz said.

He said that the plant that to be called ‘Roshan Sun Tao’ would provide high quality and low cost paper to Roshan Packages and cater to the domestic packaging market that is increasingly turning towards expensive imported paper.

The paper mill would require Rs3.944bn in capital expenditure and Rs400m in working capital, which is to be financed by a 60:40 debt to equity ratio. The plant is envisaged to come on line by FY2019.

Published in Dawn, Business & Finance weekly, February 20th, 2017