KARACHI, July 2: The financial year ended on June 30, 2008 was as lacklustre for the Initial Public Offering (IPO) as it was for the secondary market, with only eight companies entering the Karachi Stock Exchange to raise Rs12.7 billion.
The companies that sought listing at the bourses during FY08 and the amount they expected to raise were as follows: Dost Steel Limited--Rs275m; Habib Bank Limited--Rs8,108m; Arif Habib Bank Limited--Rs1,255m; Invest & Finance Securities--Rs120m; Thatta Cement Company Limited--Rs225m; Dawood Equities Limited--Rs175m; Engro Polymer & Chemical Ltd--Rs900m; and KASB Securities--Rs1,620m.
All of which aggregated to Rs12.7 billion, translating into $188 million.
“The year FY08 was a stagnant year for equity IPOs with a total of 8 new offerings against the same number during FY07,” says Khurram Schehzad at stock brokerage firm InvestCap. He observes: “The low number of IPOs was due to the continuous political uncertainty which impacted the economy as well as capital markets as the KSE recorded a negative growth of 11 per cent during FY08”.
Although the earlier year (FY07) had recorded similar number of IPOs, the significance of FY08 listings was that the private sector took the lead. During the year, seven out of a total of eight IPOs offered were from the private sector. The analyst thought that to be an encouraging sign despite little or no incentive (i.e. no tax differential) for listing and weak macroeconomic indicators.
New offerings during the year were dominated by the financial sector, which accounted for 63 per cent of the total number of new companies compared to 50 per cent the previous year. The rest of the new companies were from diverse range of industries including some of the emerging and growing sectors.
Two new companies out of a total of three which held IPOs, were from the Steel and Cement sectors (Dost Steel Ltd. and Thatta Cement Company Ltd.) and the remaining one was from Chemicals (Engro Polymer & Chemical Ltd).
The recent growth spree in the financial sector brought in two major financial disciplines of Banking and Securities with the biggest-ever listing of HBL (govt. offloaded 5 per cent of share capital), Arif Habib Bank Ltd. and KASB Securities, respectively.
The total amount raised through IPOs stood at around Rs12.67bn (USD188mn) in FY08, which was significantly higher as compared to Rs4.32bn (USD64mn) sought from the market in FY07. The sharp improvement in the amount raised was mainly due to HBL’s listing, while excluding this IPO, the amount raised through the private sector was slightly better than FY07 at Rs4.57bn.
“The reason for the low number of IPOs can be attributed to an extremely turbulent year with a highly volatile stock market and less incentives offered for listings,” analysts said.
Most analysts agree that the Government must take the lead in offering equities from state-owned companies. For the future, such plans were said to be afoot.
The government has planned initial/secondary offerings of blue chip including Pakistan Steel (10 per cent), OGDC and PPL. On the private sector front, several asset management companies are planning to list in FY09. But given the current state of affairs, it looks scarcely possible that there would be a rush of new offerings, which could satiate the appetite of investors for fresh capital.
