Financial year 2004-05 turned out to be good year
for the equities as well as debt instrument markets. The government
was able to take full advantage of the vibrant equities market as
offering of shares of state owned enterprises dominated the market.
However, public offering of United Bank failed to attract the response
and remained undersubscribed. There were 16 stock offerings (including
Eye Television and Zephyr Textile as these were fully underwritten),
which is the highest number since 1996, surpassing the mark of 13 set
in 2004. Another unique feature this time is that all the 16 offerings
were first-time offers (IPOs), as against previous years where the
government offloaded shares of already listed companies.
According to a report by InvestCap, the equity IPOs
managed to raise Rs 15 billion. Out of the 16 IPOs, 3 were government
offerings, 8 were greenfield projects and remaining 5 were IPOs of
already operational private sector organizations. The interest in
stock offerings, especially government offerings, remained vibrant.
Against the offerings amounting to Rs 17.7 billion, the subscriptions
received was close to Rs 56 billion. This denotes 3.2 times the amount
required for subscription.
As was the case last year the government offerings
attracted the major chunk of subscription money. The 3 government
offerings worth Rs 14.8 billion (including green shoe option)
attracted subscription to the tune of Rs 42.8 billion, even with UBL
being undersubscribed by Rs 2.8 billion. The UBL offering remained
undersubscribed mainly due to the lot size being reduced to 200 shares
and also due to the stock market crash in March. KAPCO's offering
created a new record with 1.4 million applications received, which may
not be broken for years to come.
Attock Petroleum, the latest OMC to be listed,
attracted subscription of Rs 10.8 billion against a much smaller
offering of Rs 0.58 billion and turned into a lottery-like situation
for applicants. The remaining 12 IPOs got subscriptions worth Rs 2.6
billion against offer of Rs 2.3 billion, showing weaker interest in
anything other than government and oil stocks.
It is expected that the government will continue to
follow its divestment policy by offering shares of state owned
enterprises through the stock market. The next entity in line is State
Life Insurance Corporation. Several private sector IPOs (around 5) are
already in line with more to come surely. The trend in favour of
government IPOs will continue to be more pronounced going forward.
The listed corporate debt market, commonly known as
the listed Term Finance Certificates (TFCs) market, had been short of
newcomers in the low interest rate scenario during 2003-04. After
seeing an extraordinary listing of 21 TFCs during 2002-03, new
listings almost dried out, only 6 TFCs were listed in 2003-04.
However, during the recently concluded financial year the number of
listings reverted back into the double digits. The slight revival of
TFC issues was due to the banking sector needs and a rising interest
A total number of 12 TFCs were offered to the
general public during 2004-05, which was exactly double the 6 TFC
offering during 2003-04. The rise in TFCs issues was mainly due to the
huge offering by the commercial banks. This was an attempt by the
banks to improve their capital adequacy ratios. More than half (to be
precise 7) of the 12 TFC issues came from the banking sector, with one
of them (UBL) even offering 2 tranches. Conspicuous by its absence
from the listed TFC market was the manufacturing sector. Another 2
TFCs came from the financial sector, while 2 were E&P company
securitizations, and one from the telecom sector (Telecard).
The amount raised through listed TFCs was very
impressive, totaling to Rs 15.6 billion. This represents a marked
improvement over just Rs 3.4 billion raised during 2003-04. Out of Rs
15.6 billion raised, more than Rs10 billionn were raised by commercial
banks, representing 65% of the total corporate debt listings during
the year. Even with this impressive amount being raised during an year
the listed corporate debt market still remains very small compared to
the listed equity market. The listed TFC market continues to linger
below 3% of the equities market. The TFC market, in the rising
interest rate scenario, is expected to witness more and larger TFC
issues. The commercial banks are expected to continue to tap this
avenue for improving their capital adequacy ratio during 2005-06.