"After witnessing just 5 IPOs in 2006, Pakistan equity market applauded listing of 11 new companies in 2007, a promising jump of 120 percent in IPOs over 2006", Bilal Hameed, an analyst at JS Global Capital Limited said and added while Index change remains a primary performance indicator of the stock market, the capital market growth can also be determined through the fresh issues floated into the market in the form of IPOs.
As was the case in 2006, only one government offering was floated at the local bourses in the current year. Habib Bank Limited (HBL), which by value and by number of shares offered, was the largest ever IPO in Pakistan and the only government offering in 2007.
In contrast, other popular IPOs during the outgoing year were of Dost Steel and Sitara Peroxide which were oversubscribed by 6.8 times and 5.7 times, respectively.
Historically, 2005 and 2004 were the best years in terms of number of IPOs. A total of 17 IPOs were floated in 2005 to raise an amount of Rs 9.2 billion, while 14 IPOs were issued in 2004 to raise Rs 19.7 billion. Massive oversubscription was witnessed in both the years with Rs 35.6 billion and Rs 79.0 billion received from investors in 2005 and 2004, respectively.
The outgoing year has the distinction of witnessing the largest ever IPO in the capital market's history of the country. HBL's IPO has been in the limelight ever since it emerged as the largest ever IPO with respect to both value and number of shares offered. The government offered 34.5 million shares with a green shoe option of additional 17.25 million shares in case of over subscription, taking the total offering to 51.75 million shares. The offer price was set at Rs 235 per share, inclusive of a premium of Rs 225 per share.
The Privatisation Commission received a total of 428,831 (426,736 local, 2,095 oversees) applications worth Rs 18.6 billion for the IPO of HBL, against the offered amount of Rs 12.2 billion (including green show option). So the IPO was oversubscribed by 1.52 times. As a result, OGDC's offering of Rs 6.9 billion in 2004 now rests at a distant second in value terms.
The keen investor interest in HBL's IPO could be attributable to the strong profitability in the banking sector during the last few years amid mergers and acquisition transactions, Bilal Hameed said.
In addition to HBL, major investors' interest was witnessed in Dost Steel as its IPO received a subscription of Rs 1.8 billion (6.8 times the IPO size). This excitement in a steel company can be attributed to high construction activities in the country, resulting in higher consumption of steel. In addition, rising steel prices are likely to have a positive impact on the profitability of the steel sector. Moreover, Sitara Peroxide was another successful IPO in 2007, receiving a subscription of Rs 1.4 billion (5.7 times the offering size).
Hira Textile Mills was the only company, whose IPO was undersubscribed as it was only able to receive a subscription of Rs 38 million versus Rs 313 million offered.
Out of the 11 IPOs floated in 2007, Allied Rental Modaraba received Rs 161 million against offered amount of Rs 150 million, BMA Principal Guaranteed Fund received Rs 51 million against Rs 50 million offered, PACE (Pakistan) Limited received Rs 1,084 million against Rs 550 million offered, JS ABAMCO Limited received Rs 2,532 million against Rs 1,300 million offered, Flying Cement Company Limited received Rs 525 million against Rs 140 million offered, Pervaiz Ahmed Securities received Rs 543 million against Rs 250 million offered, Pak Oman Advantage Fund received Rs 260 million against Rs 250 million offered, Sitara Peroxide Limited received Rs 1,429 million against Rs 250 million offered, HBL received Rs 18,600 million against Rs 12,200 million offered, Dost Steels Limited received Rs 1,868 million against Rs 275 million offered while Hira Steel Mills Limited received only Rs 38 million against Rs 313 million offered.