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Stock market’s first IPO after 15 months oversubscribed


July 8, 2020

KARACHI: The Organic Meat Company Limited, the country’s leading halal meat exporter, on Tuesday closed its book building, snapping a 15-month lull in initial public offering (IPO) in the stocks market.

Bids of around Rs1.4 billion were received in the first phase of offering to qualified investors. Bids of 68.1 million shares were received for 40 million shares. Strike price of the issue was Rs20, which was Rs2 higher than the floor price. Retail offering will be done next week.

Analysts said investor response was far better than expected despite corona-led economic contraction. Leading local and foreign investors along with high net worth participated in the bidding.

The World Bank revised the real GDP growth projection for Pakistan to 1.1 percent from an earlier projection of 2.4 percent for 2020 and 0.9 percent for 2021 from the earlier three percent on account of steep economic contraction since March due to coronavirus-led lockdown.

Though the lockdown eased up, economic recovery is still taking place at a slower pace.

Last year, the Securities and Exchange Commission of Pakistan (SECP) amended the Public Offering Regulations 2017 to attract new listings, improve capital formation and ease of doing business.

“The objective behind the proposed amendments is to promote capital formation by facilitating issuers, reducing the cost of an IPO and safeguarding the interest of general public by enhancing disclosures,” SECP said in a statement then.

The drought in primary equity market has been extending for the last couple of years. Exactly three companies went to the market to issue public offerings in 2018, 2017 and 2016. The numbers remained low compared to the scheduled issuance at the start of each year.

In 2017, Pakistan Stock Exchange raised Rs4.49 billion in primary offerings through floating 160.3 million shares at a floor price of 28/share. Its strike price remained the same. The issue was 20 percent of the PSX’s stake. Earlier, its 40 percent strategic stake was sold to a consortium of Chinese investors.

An analyst said low number of public offerings reflected the subdued appetite of private sector. The SECP said the objective eligibility criteria for listing of companies is being reviewed to enable companies that presents a viable time bound business plan to raise funds in order to promote capital formation through securities market.

The companies are required to comply with certain conditions including enhanced risk disclosures in the offering document for information of the prospective investors.