Investor appetite tempts firms to issue Rs8.5bln worth of IPOs

KARACHI: Growing appetite of investors is piquing interest of companies to vie for bigger pie of funds from equity market as two consumer goods firms are ready for public offerings for more than eight billion rupees at Pakistan Stock Exchange (PSX). 

Edible oil maker Dalda Foods Limited has planned to issue 82.5 million shares at a floor price of Rs85/share through the book building process in order to fund its expansion. Besides, AGP Pharma will be issuing 35 million shares constituting 12.5 percent of paid-up capital at a floor price of Rs40/share to broaden the company’s shareholder base.  Both the IPOs are expected in the next couple of months after the approval to prospectuses.

Khurram Schehzad, chief commercial officer at JS Global Capital said there is an appetite, which was evident from the over-subscription of two IPOs held this year, including Ittefaq Industries and Roshan Packages.  “Investors are very much interested in new companies from new sectors coming to the bourse,” Schehzad said. “Investment appetite of institutional, retail as well as foreign investors has increased and new industrial concerns are welcome at the market.”

The analyst said there were more than a dozen IPOs in the range of Rs1 to Rs3 billion in the last couple of years. “Now big companies are opting for listing, and regulations would encourage (them).”

PSX has become the first self-listed stock market in south Asia after issuing its 160 million shares to public at a floor price of Rs28/share in June.

PSX emerged as the best performing market in Asia and fifth in the world in 2016 with 45 percent annual rate of return. 

Dalda Foods Limited, in a statement, said the fresh equity from IPO will be utilised for making capital expenditure on Phase-II seed extraction plant to increase seed crushing capacity by an additional 500 tonnes/day to meet future demand. The food company has already invested Rs844 million in oil seed extraction factory, which was commissioned in 2013. Currently, the factory has a seed crushing production capacity of 300 tonnes/day.

“The proposed expansion will improve cost efficiencies, enable increased utilisation of locally-grown oil seeds, reduce impact of foreign exchange volatility and generate additional profits that will help fund future business opportunities,” said the company.

Dalda Foods is engaged in the business of manufacture and sale of edible oils and fats, snacks and tea whitener. Its holding company DFL Corporation Private Limited also intends to divest partial shareholding from Dalda Foods.

The issue of Dalda Foods shares will be carried out through a combination of IPO and offer for sale. Of the total issue size, DFL Corporation will divest 52.5 million shares (15.9 percent of post-Issue paid-up capital) and the remaining 30 million new shares (9.1 percent of post-Issue paid-up capital of Dalda Foods) will be issued to the investors.

Dalda Foods was incorporated in 2004 as a private limited company after its exit from the group of Unilever Pakistan Ltd. Last year, its revenue was recorded at Rs29 billion. 

Pharmaceutical manufacturer AGP began commercial operations in 1989 as an independent pharmaceutical manufacturing company in Karachi. It has grown steadily through manufacturing and marketing products under licensing arrangements with many companies of international repute and simultaneously through manufacturing and marketing of its own brands.

A leading Karachi-headquartered pharmaceutical company acquired AGP three years back. Since then, it has shown remarkable improvement as its revenue increased to Rs4.206 billion in 2016 from Rs3.338 billion in 2014.