Hi-Tech Lubricants targets to raise Rs1.25bln for expansion

KARACHI: Hi-Tech Lubricants Limited, a Pakistan’s leading oil distributor, has planned to raise Rs1.25 billion by first-time offering one-fourth of the company’s shares in the equity market, its senior official said on Wednesday.

Chief Financial Officer Muhammad Imran at Hi-Tech Lubricants Limited said the raised fund through 25 percent share offers will be used to expand the company’s production plant in Lahore and open retail outlets across the country.

Wednesday was the first of the two-day time to sell 21.75 million shares to institutional and high net worth investors through book building process.   The firm has set a floor (minimum) price at Rs37/share. 

"The floor price increased to Rs38/share at a point of the process on Wednesday," Imran said.

He added that the firm is expecting a final share price between Rs50-60/shares by the time the book building process is completed on Thursday.

The firm will offer for sale 7.25 million shares to general public at the price to be established in the book building process later this month.

“If the firm sells all the allocated shares at floor price of Rs37, it would raise Rs1.073 billion. However, it estimates to raise Rs1.25 billion,” Imran said.  “The expansion will allow us to manufacture jerry cans and drums from plastic for 18 to 210-litre of lubricants for industrial consumers,” Imran said.

“The new plants will start operation within the next six months. We will inject Rs200 million into the expansion and another Rs770 million to open 37 retail outlets in 11 major cities of the country.”  Presently, the company manufactures plastic bottles and blends lubricants, and is engaged in packaging of Zic and SK brands. 

At present, the company has a capacity to manufacture plastic bottles for 0.7 to 10-litre.

Imran said the production enhancement will help in increasing “our gross profit margins by 15-20 percent.”  Cans and drums will allow the company to import lubricant products in bulk. 

At present, it imports lubricants in iron drums from South Korea. 

“One container can carry maximum 22,000-litre in iron drums. The bulk import will increase this volume to 42,000-litre/container and cut the cost by half to $1,500/container,” Imran said.

Besides, the company will also launch two new products: lubricant for diesel engine vehicles and for power transformers.

All the outlets would be ready to provide services within the next 15 months. Out of the total 37 outlets in the pipeline, eight would directly be owned and operated by the firm. Remaining outlets would be outsourced.

Besides, injecting the capital from local bourses, the firm will inject another Rs100 million from its own accounts. 

The firm applied to get listed its shares on Karachi and Lahore stock exchanges.

Hi-Tech Lubricants reported a profit after tax at Rs338 million for the year ended June 30, 2015. It sold goods worth Rs5.46 billion during the year.  Its compound annual growth rate (CAGR) stands at 21.1 percent at present and the company projects a conservative CAGR at 20 percent for the next five years.