Khyber Bank to raise Rs 900 million through IPO

The Bank of Khyber (BoK) has planned to list its entity at Karachi Stock Exchange, raising Rs 900 million through initial public offering soon. The BoK has jointly mandated AMZ Securities (Pvt) Ltd and Pak Oman Investment Company Ltd) to act as 'Financial Advisers' to BoK for the proposed public offering ('IPO') of up to 60 million ordinary shares at a premium of Rs 5 per share, ie at an offer price of Rs 15 per share.
The Bank of Khyber was established in 1991 under Act XIV of the Provincial Assembly of NWFP. It started commercial operations in November, 1991, and became a scheduled bank with the State Bank of Pakistan in 1994.
BoK operates with a network of 29 branches in different cities across the country. It is principally engaged in the business of banking as defined in the Banking Companies Ordinance, 1962, and offers full range of commercial banking services to corporate, middle market and retail segments as well as SMEs.
The government of NWFP holds 87 percent shareholding in BoK. The remaining 13 percent shareholding is held by Deutsche Investitions und Entwicklungsgesellschaft mbh ('DEG').
Going forward, BoK aims to be an active player in the banking sector, with emphasis on competitiveness, quality human resources and implementation of state-of-the-art technologies. Its goal is to provide multiple commercial banking products across Pakistan to a diverse client base, while at the same time maximising shareholder value.
The Bank is fully cognizant of the potential offered by Islamic banking products. In this regard it has established five Islamic banking branches that offer Shariah-compliant banking instruments. Plans are at hand to increase the number of such branches.
In order to meet State Bank of Pakistan's minimum capital requirements, BoK plans to conduct an IPO issue for 41.1 million shares, which would be offered at Rs 15 per share (inclusive of a premium of Rs 5 per share). The entire issue would take place via initial public offer, with no private placement. The shares will be listed on Karachi Stock Exchange (Guarantee) Limited, with subscription date expected to be by end-August, 2005.
At the offered price, BoK is an attractive buy and offers considerable upside to prospective investors.
The PE multiple of BoK presently stands at 7.14--a 29 percent discount to the banking sector multiple of 10. The Bank's price to book ratio is 0.85 multiple as opposed to an industry average of 1.80 multiple. Based on December 31, 2004, financials, the book value works out to Rs 17.66--Rs 2.66 over the offer price.