Amreli Steels gets ready for its initial public offering

KARACHI: Pakistan’s leading private sector steel manufacturer Amreli Steels Limited is all set to launch its initial public offering (IPO) in mid-September and hopes to raise Rs3.37 billion for the expansion of its reinforcement bars’ manufacturing, a company’s official said.
“We are offering 74 million shares; 75 percent of which will be offered to institutions and high net-worth individuals and the rest to general public,” said Hadi Akberali, director at Amreli Steels.
”We are expecting a full subscription and the offer price, based on fundamentals, is likely to settle somewhere around Rs50/share.”
However, the rebar maker is not completely relying on its upcoming IPO to expand business and has already requested a syndicated loan of Rs1.5 billion from UBL and Askari Bank.
“Expansion in our manufacturing facility will be complete by December 2016, raising our production capacity to 480,000 tons/year,” Akberali said. The company's current production capacity stands at 180,000 tons/year.
The steelmaker is betting on a potential boom in demand for the alloy in the wake of China’s pledged investment for the development of China-Pakistan economic corridor.
Recently, China signed $28 billion deals with Pakistan as part of a planned $45 billion economic corridor. The deals are related to the construction of power plants and dams.
He said there will be a huge demand for grade iron and steel for the corridor project.
He added that the government should encourage entrepreneurs to invest in the steel sector by giving them incentives.
Akberali welcomed the growth in remittances, which is boosting consumer spending in the $232 billion economy.
He said GDP growth is jacking up steel demand.
Moreover, he added that lower oil prices and resultant lower import bill has allowed the government to push up spending on public sector development programme.
“Pakistan will benefit around $3.2 billion from the lower oil prices this year and this will go to the construction sector,” he said.
Akberali said international steel prices have dropped around 25 percent since January, but the impact could not be passed on to consumers in the same proportionate because of higher taxes.
He said steelmakers pay Rs9.0/kWh (kilowatt hour) as sales tax on energy consumption.
More than 100 steel makers are operating in the country, while steel is also imported.
“The market is flooded with substandard quality of iron and steel products as well as imported goods,” he said, adding although this doesn’t bite the company’s market share.
Akberali said the company planned a coal-based power generation plant primarily to meet their own energy requirement. “The surplus will be transferred to national grid,” he added.