IPO Summit 2024

The following is the full text of the speech of MD and CEO, Pakistan Stock Exchange Farrukh H. Khan that he made at IPO Summit on January 20, 2024:

Respected Finance Minister, Dr Shamshad Akhtar, Chairman SECP Mr Akif Saeed, distinguished guests, past presidents of PSX, ladies & gentlemen, assalam-u-alaikum.

I would like to welcome you all to our flagship event of the year, the IPO Summit 2024 – Empowering the Future of Capital Markets. In particular I would like to welcome the many companies present here that are considering IPOs, the advisors and investors that make IPOs successful.

PSX IPO Summit 2024: Empowering the future of capital markets

I would also specially like to welcome the respected Finance Minister, Dr Shamshad Akhtar, who kindly consented to be the Chief Guest at this event, despite her very busy schedule.

We have an outstanding program that has been curated for you. In addition to technical sessions, you will also hear from some the leading and inspiring entrepreneurs of Pakistan, who have successfully leveraged the capital markets to generate exponential growth, diversification, create sustainable businesses and capital structures that transcend generations.

I meet so many great cos in Pakistan, across different sectors, and I have always been perplexed that why don’t we have more regional and global scale companies coming out of Pakistan.

Based on my almost three decades of working in the capital markets and with many of the leading companies in Pakistan, I believe that a key reason is that our entrepreneurs don’t leverage the capital markets for growth capital.

We are fortunate that we will hear from some of the leading business groups in Pakistan about how they have leveraged the capital markets to grow exponentially. If we look across the border, Reliance would never have become the largest group in Asia in one generation if they did not skillfully leverage the capital markets. And all of you know Tesla, Ali Baba, Amazon, Samsung and so many others. They would not have been able to achieve such success, scale and dominance without the support of capital markets.

Listing your company is a key step in wealth creation for the entrepreneur. The advantages are many more than just raising capital, and include:

1- Enhancing your Company’s Brand & Public Profile

2- Professionalise, attract and retain high quality HR. In the knowledge economy of today, HR is even more important than capital and a clear competitive advantage.

3- Listing makes intergeneration wealth transfers significantly easier, enabling business to thrive and grow across generations, reducing the risk of family disputes impacting the business.

4- Listed companies have more flexibility in their capital structures and greater financing options.

5- Allows entrepreneurs to share risk, and rewards, with other investors.

6- And despite some criticism and apprehensions that some may feel, good corporate governance actually protects the majority shareholder the most by helping to develop a large scale, sustainable business.

So to all the entrepreneurs here, I say that please come forward, raise capital for your great businesses and grow your companies to a global scale. There is enough liquidity and investors to back you. This is a particularly opportune time, given the recent run up in the market and the high interest rate environment making bank borrowing prohibitive.

Historically, the capital markets in Pakistan have remained small and underutilized by both the private and public sectors. This has led to heavy over-reliance for funding on the banking sector. Our economy is running on one wheel. This is not sustainable for either the economy or the banks. No modern economy can function efficiently without large and liquid capital markets. With the significant GOP borrowing requirements, this has resulted in crowding out of the private sector, as well as high interest rates.

In response, SECP and PSX have taken a number of steps to ease capital raising from the markets. These include:

1- Significantly streamlining the IPO process and timelines to 29 working days from receiving the complete application to listing at the Exchange.

2- To help smaller investors we have introduced the E IPO facility and with CDC now investors who don’t have brokerage accounts can also participate in IPOs.

3- To facilitate issuers, we completely digitized the listing application process and when completed, investors also have access to the portal for learning about upcoming IPOs.

4- As we know a large number of issuers and investors want to adhere to shariah principles. I am happy to share that Shariah options are fully available at PSX, for issuers and investors, for both debt and equity offerings. In fact, PSX has been awarded the best Islamic stock exchange for 3 years running by global Islamic finance awards. GIFA.

5- Similarly for smaller cos we have introduced a separate board, growth enterprise market or the GEM board.

6- The 2 strategic areas of growth that we are pursuing are debt capital markets and REITs.

You will hear and learn about all these areas in the sessions today.

It is imperative for the growth of Pakistan’s economy to create a conducive environment which will help to attract more companies and investors to the capital markets.

Despite the challenging operating environment, I would like to share that PSX and all our stake holders have worked very hard to modernize and make the capital markets accessible to all issuers and investors. I would like to acknowledge and thank the SECP and the PSX board, for their support and guidance, as well our TREC holders. It is WIP but we have made significant progress in the last three years. Some of the achievements include:

1- Introducing online a/c opening and greatly simplifying the account opening process

2- For the first time banks and capital markets are sharing KYC information. This has enabled development of RDA equity account and now we have started local KYC sharing with banks as well.

3- New products like simplified sahulat accounts for smaller investors have been introduced.

4- As mentioned, a new GEM board has been launched for smaller cos to raise equity and debt capital easily.

5- A state of the art trading and surveillance system has been implemented.

6- The most recent and exciting development is the issuance of GoP sukuks on PSX. This is a great example of MOF, SECP and PSX working together to grow the capital markets, benefit public finances and provide new investment opportunities for investors. PSX is now one of the few exchanges globally, where govt paper is auctioned directly in the capital markets.

These initiatives will be transformative in the coming 2-3 years to grow the capital markets and increase the investor base.

PSX remains committed to building the capacity and trust required for capital formation and financial inclusion.

To conclude, I would like to thank all the speakers, especially those who have travelled to be with us and share their perspectives. I would also like to thank CDC, NCCPL, SECP and all our sponsors. And of course the great team at PSX.

I hope you find this event useful in helping you make informed decisions about raising debt and equity from the capital markets. There is an immense amount of knowledge and experience in this hall. Please make use of it. We are all here to support you in growing your businesses. We plan to follow up and have such IPO summits in all the major cities of Pakistan.

I am confident that the discussions today will go a long way in helping us increase the number of IPOs, help you grow your businesses and benefit investors throughout Pakistan.

Thank you.

Copyright Business Recorder, 2024