It is an honor for the Pakistan Stock Exchange to host IPO Summit-2017 in Lahore in partnership with the South Asian Federation of Stock Exchanges (SAFE). This forum helps Investors and Capital seekers to interact and understand the risks and rewards in context of specific project/idea and growth potential in the wake of equity based financing. Apart from these two major entities in the Summit, professionals from major DFIs, investment banking divisions of commercial banks and key players in the brokerage industry would also discuss ways and means to enhance listing on the stock exchange outside the paradigm of traditional set-up of banks and borrowers.
PSX has been at the forefront of capital market development efforts with concurrent focus on investor convenience and risk management. During the period from 2006 to 2016, just the companies listed on the PSX have solely raised over PKR 404bn via rights issues while the Government of Pakistan itself has raisedover PKR 275bn from privatization of state-owned-enterprises through capital markets. PSX has played its due role in acting as a facilitator and conduit of a long term funding source for Pakistan's industry,while PSX and SAFE's latest drive has greater focus on generating awareness amongst potential non-listed corporate sector entities in Pakistan to enlist itself on the Pakistan Stock Exchange. In the lifecycle of many commercial enterprises and business units there comes a time when they have to consider an inevitable question as to whether they should move from a privately owned structure-a family owned business, to a publicly listed company.
Apart from reducing the overall cost of capital, obtaining financing outside of the banking system or reducing debt are some of the other reasons as to why one enterprise may consider going public which in turn may also reduce interest costs on existing debt that the company might have.
The main reason that companies decide to go public, however, is to raise money - and spread the risk of ownership among a large group of shareholders. Spreading the risk of ownership is especially important when a company grows, with the original shareholders wanting to cash in some of their profits while still retaining a percentage of the company.
Listing will not only bring "Fresh-Capital", but will bring some changes in the control structures too and depending on the size of inflow, the owners of family owned business may become answerable to a much wider group of shareholders, along with front-line and apex regulator. Hence, the change of shareholding pattern brings changes to the power centers, such as the one that is taking place in case of PSX too.
PSX is showcasing around 10 new enterprises in the IPO Summit-2017. Two of these companies are from Pharmaceutical Sector, two are from Transport and Logistics, whereas, two from Food and Beverages Sector and one each from Engineering, Oil and Gas, Textile, and Power Generation Sectors respectively. Given that any of the these enterprises opts to go public and gets itself listed on the stock exchange, then the owners of these enterprises will be represented on their board of directors and will be required to ensure that a reasonable Return On Investment is provided to shareholders which is comparable with overall returns of the market and relevant sector that they represent.
With this landscape and outset, the incumbent new entrants to the Capital Market will be faced with the challenge of providing returns in line with overall growth in the real-economy which is reflected in Capital Market. Given below are the benefits which any one of the above companies may avail by deciding to be listed on PSX:
1 Companies have additional leverage when obtaining loans from financial institutions.
2 Market exposure - having a company's stock listed on an exchange could attract the attention of mutual fund, market makers and institutional traders.
3 Indirect advertising - the rates of publically listed companies are published on PSX website, official daily quotation of PSX and in the leading newspapers. The corporate announcements and real-time trade data is disseminated to all leading news agencies including Reuters and Bloomberg on real-time basis.
4 Brand equity - having a listing on a stock exchange also affords the company's increased credibility with the public, having the company indirectly endorsed through having their stock traded on the Exchange.
5 Being able to raise additional funds through the issuance of more stocks.
6 Companies can offer securities in the acquisition of other companies.
7 Stock and stock options programs can be offered to potential employees, making the company attractive to top talent.
As mentioned earlier there are 10 new enterprises looking forward to get listed on Pakistan Stock Exchange. The motive of majority of these enterprises eyeing listing, revolves around the notion of either expansion or liquidity generation and meeting financing needs.
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