FINANCE

 

CHENAB LIMITED'S IPO FOR 30 MILLION SHARES

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Textiles' future lies in value addition, says Mian Latif

 

By AMANULLAH BASHAR
July 11 - 17, 2005
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Chenab Limited, an export-oriented textile player having a credit to introduce Made-in-Pakistan brand in diversified textile products in the domestic as well as European markets, has made Initial Public Offering (IPO) of its 30 million shares at a price of Rs18 each from Karachi Stock Market.

The Chenab Public Offering, available on July 13 and July 14, is expected to attract an overwhelming market response on the back of a strong professional management of the group stemming from cotton growing to spinning, weaving and now in value addition reflected in a diversified range of textile products fetching over $100 million exports especially from European market.

Chenab Limited is a manufacturer and exporter of textile products and garments. The company is part of the Chenab Group, which began its business in 1975 under the name of Chenab Textile Industries, Faisalabad, as a fabrics processing unit. Chenab is an integrated textile unit with its operations comprising: spinning, weaving, bleaching, dyeing, printing, finishing and above all initiating branded garments in the local and foreign market.

Chenab, having a focus on value-addition, possesses a well-diversified product range in bed linen, bedspreads, curtains, and table linen and kitchen accessories. Chenab through its group companies and associates has set up ChenOne outlets, thus developing their own brand. Among the sponsors/directors, the prominent names include that of Muhammad Naeem, Muhammad Farhan Latif, Mian Muhammad Latif and Mian Muhammad Javaid Iqbal.

The IPO consists of 15 million shares without offering the same to the existing shareholders or preference shareholders of the company. Thus subsequent to this offer for sale, the total paid-up capital of Chenab Limited is expected to be Rs1.15billion comprising 115 million shares. The offer for sale document mentions that the sponsors will invest 60% of the proceeds from the sale of their shares, amounting to Rs162million in the company by way of an interest-free subordinated loan having a four-year tenor.

Speaking at the launch of IPO at the auditorium of Karachi Stock Exchange, Mian Latif, Chairman Chenab Group, said that the proceeds of the new ordinary shares issue and the offer for sale (60 percent of the proceeds from the offer for sale will be injected by the offerer as a markup free subordinated loan for four years) will be utilized by the company mainly for balance sheet restructuring through the repayment of certain long term loans, besides ensuring that the company has enough cash in hand to finance its working capital requirement.

 

 

Referring to the provisional trading at Rs28, he remarked in a lighter mood that the actual worth of Chenab shares in his assessment was Rs40 and the investors who repose confidence would hopefully earn handsomely in future.

Outlining the significant role played by the textile sector in the economy of Pakistan, Mian Latif said with a sense of great confidence that the textile sector having an edge over competitors especially in terms of quality has many surprises in store to offer in future. Describing value addition as the key to optimize available resources, Mian Latif said that the textile industry in Pakistan has the potential to earn $25 billion provided the entire cotton was converted into value added products. It is of course a matter of satisfaction that the bumper cotton crop estimated at 14.5 million this year has almost been consumed by the textile industry in Pakistan; however, we have to enhance the pace of value addition. Another area where the textile industry lacks is the absence of mass production which is the winning point for China and other major textile players. Otherwise, the input cost is either matching or even higher as compared to Pakistan.

Being a major player in the textile world, Pakistan after phasing of quota regime in the wake of implementation of WTO rules, was successfully competing with the textile giant China as well as India mainly due to quality products.

Replying to a question, he said that China has an edge because of a strong industrial base for mass production which helps China to bring down cost of production, otherwise, rest of the inputs like labor and power is not so cheaper as generally believed in our country.

BLEND OF IPO

30 million shares of Chenab Limited are being offered to the public at Rs18/share (i.e. at a premium of Rs8/share) during July 13-14, 2005. This is a combination of Initial Public Offering (IPO) and Offer for Sale by the sponsors. The sponsors are offering 15 million shares out of the present 100 million shares outstanding.