ISLAMABAD: Modaraba AL Mali is planning to launch a unique revolving fund under the name of IPO Support Fund. This was stated by Aftab Ahmad Chaudhry, after taking over the management control of BankIslami Modaraba Investments Limited, which will soon be renamed as AssetPlex Modaraba Management Limited.
Aftab, who has been a consistent activist for promoting newer IPOs and improving the supply side quality of the stock market through rehabilitation of defaulter companies, stated that the objective of the fund is to mobilize the IPO Market so that the newer companies can become available to our market investors.
He said that in view of the lacklustre IPO Market, investors and day traders have to deal with a narrow supply line comprising 550 listed companies, out of which about 120 happen to be on the defaulter counter and about 50 companies were untraceable.
He said that the IPO Support Fund is aimed at offering an attractive product so that the new companies don’t have to worry about putting some money aside for meeting IPO costs, while being in a dire need of growth finance.
He said that since the IPO costs amount to be about 6-7% of the total funds raised from the market and since a bulk of the same are to be spent at mobilization/engagement stages; therefore, for many companies such costs remain a considerable factor in their decision of putting a faith in the market-oriented finance.
He said that it was because of this reason that the IPO Support Fund has been conceived, which will be launched after necessary Shariah and Regulatory clearances. He said that initially, the fund size is envisioned to be Rs100 million, which may be enhanced further in view of the future demand.
Elaborating on the dynamics of the fund, Aftab stated that any IPO making company (‘company’), which needs finance to pay for its IPO-process costs shall have to place between 5-20% of its equity in an escrow/custodian arrangement with Digital Custodian Company. Upon placement of the required equity in escrow/custody arrangement, MODAM shall earmark a dedicated IPO Support Fund for the company, and start paying mobilization and other professional costs out of the earmarked IPO Support Fund. The repayment of the utilized IPO Support Fund shall be done from the IPO proceeds of the company.
He said that after necessary legal & Shariah review, the product is expected to be offered during the first quarter of the next financial year. He further said that with the finalization of the product, some potential IPO companies are also being sensitized about the benefits of the new product.
He was optimistic that the demand for this kind of fund shall grow and soon many other players may start offering some similar products in the future.
Copyright Business Recorder, 2021
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