Ittefaq Industries plans initial public offering

KARACHI: Ittefaq Iron Industries Limited (IIIL) involved in re-bars manufacturing business plans to raise Rs500 million through initial public offering (IPO) for meeting its working capital requirements, market sources said.

Sharoon Ahmed at Elixir Securities said despite strong growth witnessed in re-bars demand in recent years, IIIL dispatches remained flat in the last three years, owing to working capital issues and power shortages.  “The management is hopeful that equity proceeds from IPO will help it improve utilisation levels,” Sharoon added.

The company has induction furnace / bar mill / girder mill of 120,000 tons/a le due to border tension and security issues. “The management believes that modification in design of girder mill may enable it to produce angles/channels/girders suitable for domestic market,” Ahmed added.  The company has not yet conducted feasibility study of the said changes and its current growth strategy does not include girder mill operations.

The company plans to raise funds over and above Rs501 million through 41.75 million shares issue - 31.82 percent of the post-IPO capital - at floor price of Rs12/share. As much as 75 percent of the total IPO would be issued to institutions and high net-worth individuals through the book building process and the rest to the general public. “The management plans to utilize IPO proceeds to meet its working capital requirement for increased output, while the excess funds may be used for repaying short term debt, modification of girder mill subject to economic feasibility,” Ahmed added.

Ittefaq Iron Industries Limited (IIIL) belongs to Alshafi Group of Companies whose roots can be traced back to Ittefaq Foundries established by Mian Muhammad Sharif in 1940s. While Alshafi Group was carved out from Ittefaq Foundries in 1990s, Alshafi Steel (melt shop) & Ittefaq Sons (rolling plant) were incorporated in 2004 and started their commercial operations from 2006. Alshafi Steel (melt shop) & Ittefaq Sons (rolling plant) were merged in 2009 into Ittefaq Iron Industries.