Pakistan equity market witnessed three Initial Public Offerings (IPOs) during 2017 (excluding Modarabas) raising Rs 8.6 billion, compared with three IPOs during 2016, which raised Rs 4.2 billion. The year 2017 turned out to be a tale of two halves for the KSE-100 index where the first half saw a bull-run fuelled by MSCI-EM inclusion euphoria where the market rallied up to a peak of 52,876 points on May 24, 2017 with a year-to-date (YTD) gain of 11 percent.
But subsequently things went south drastically, our weight in MSCI EM turned out to be lower than expected, foreigners sold instead of buying, federal budget was unfavorable, Panama Leaks led to disqualification of Pakistan's prime minister Sharif & our economic shortcoming were scrutinized more than ever. These factors culminated in the KSE-100 index shedding a whopping 25 percent from its peak and taking YTD return to minus 17 percent.
"After five years of strong gains during 2012-2016, where the KSE-100 index returned 33 percent (29 percent in US$) CAGR soaring from 11,000 to 48,000, the market has posted a significant decline in 2017," an analyst at Topline Securities said. Previously, the market lost 6 percent in 2011, while in crisis year of 2008 it lost 58 percent, he added.
Due to deteriorating investment climate and some regulatory setbacks, few IPOs which were scheduled for 2017 were delayed. Inbox Business Technologies, Dawood Group software house that provides managed IT services, aims to issue 45.4 million shares (39 percent of post IPO capital) at a floor price of Rs 30/share for investment in project assets and working capital needs.
Dalda Foods, a cooking oil brand, issue consists of 82.5 million shares (25 percent of post IPO) at floor of Rs 85/share, of which 30 million are being issued by Dalda while 52.5 million shares are being offered by DFL Corporation (Private) to expand their oil extraction capacity. AGP Pharmaceuticals plans to offer 35 million shares (12.5 percent) at floor of Rs 40/share to increase investor base and governance.
Besides these there are a few more IPOs expected in 2018 including (1) Hira Textile Mill's (HIRAT) towel exporting subsidiary Hira Terry Mill plans to float 25 million shares (35% of Post IPO), at a floor price of Rs 23/sh to expand and modernize their towel export business; (2) TPL Corporation's (TPL) subsidiary TPL Life Insurance plans to float 40mn shares (37 percent Post IPO) at a floor price of Rs 10/share to grow its existing life and health insurance business as well as maintaining the liquidity requirements; (3) Unicol Limited, Ethanol producing JV between three leading sugar mills; Faran (FRSM), Mehran (MRNS) & Mirpurkhas (MIRKS), aims to offer 37.5 million shares (25 percent of Post) at a floor of Rs 24/share to broaden their investor base & improve governance; (4) Matco Foods, rice processor & one of the largest Basmati rice exporters from Pakistan, aims to issue 29.1 shares (25 percent) at floor of Rs 26/share for the expansion of its Rice Glucose / Syrup and Rice Protein plant; (5) Liberty Power Tech, 200MW Residual Fuel Oil (RFO) based thermal power plant, plans to offer 126.1 million shares (25 percent) at floor of Rs 40/share to broaden investor base.
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