Trend of new listings remained depressing for second consecutive year

The trend of new listings remained depressing in the second consecutive year as the Pakistan equity market saw only four IPOs (initial public offering) during fiscal year FY12. It was the second consecutive year that saw very depressing trend with regard to new listings as the capital market had seen only two IPOs in the fiscal year FY11.
This trend was depressing as compared to last 5 and 10 years when average 5 and 9 IPOs a year were floated in Pakistan Market, respectively. The trend of new listings remained very depressing despite the fact that the share prices posted a gain of 10 percent in FY12.
During the year FY12, a total of Rs 2.4 billion ($26 million) was offered to general public, high net worth individuals (HNWI) and local and foreign institutions. Last year in FY11, the companies offered almost same amount of Rs 2.4 billion ($26 million) through two offerings.
Out of Rs 2.4 billion total amount offered in FY12, Rs 0.8 billion ($9 million) was offered to general public whereas 1.6 billion ($18 million) were offered to HNWI and local/foreign institutions through private placement and book building. Interesting to note that out of Rs 0.8 billion offered to general public, Rs 675 million was from single largest IPO of Engro Foods while Rs 175 million was from rest of the three offerings.
"Few offerings and that too of a small size shows that the companies are not enthusiastic in raising capital through general public on account of low volumes and investors' bad experience with few previous IPOs", Muhammad Sohail, leading analyst and CEO of Topline Securities said. In last 2 years (FY11- FY12) out of 6 IPOs 3 were undersubscribed is another chief factor why companies are not raising funds, he added.
Of the four IPOs in Fy12, two were related to financial service, ie TPL Direct Insurance and Next Capital. EFood was from consumer while the year also saw technology related IPO of TPL Direct. Two out of four were undersubscribed. The largest IPO of the EFood was under-unsubscribe by 0.95x, though it was the only offering that managed to raise Rs 1.9 billion (including private placement) at a premium of Rs 15 per share. Similarly, Next Capital was also not fully subscribed. On the other hand, TPL Direct and TPL Trakker were over subscribed by 1.03x and 1.3x (including book building), respectively.