INITIAL PUBLIC OFFERING IPO'S

NAJAM KHAN, Research Associate
Apr 23 - 29, 2007

Conversion of private company into public company through Initial Public Offering (IPO) is different as compared to an acquisition of a company by a public one. In both exercises, main purpose is to generate capital for the corporation for its future growth. IPO is first auction of the firm's common shares to investors in a public stock exchange. This process is also known as a 'primary' offering. Once the corporations are listed on an exchange can float more shares at any time onwards in order to generate more funds at the same time, it is called 'follow on' offering. In secondary offering, shareholders can purchase and sell with each other.

NEW LISTINGS ON BOARD OF KSE DURING CY2006

2006 prove to be a pretty bow year for IPO's with only 9 new offerings as against 19 seen in 2005. In CY06, the worth of new listed companies was Rs14.7 million showing a decline of 50% as comparing to CY05. The total market capitalization during CY06 was Rs27.71 million and share of capital of newly listed companies in total market capitalization was only 0.53% in the same period where as in CY05 it was merely 1%. Major reason of repudiate in capital of new listed companies is due to the absence of government companies in new listing. Now the government needs to cart new companies in order to bring diversity of stocks for investment. Listed below are new listings during CY2006:

* PICIC Energy Fund
* UTP Growth Fund
* NAMCO Balanced Fund
* WE Balanced Fund
* Bank of Khyber
* Bank Islami
* Atlas Bank Limited
* PICIC Insurance
* Colony Mills Ltd.

 

UPTO 31-12-2003

UPTO 31-12-2004

UPTO 30-12-2005

UPTO
29-12-2006

UPTO
17-04-2007

Total No. of Listed Companies

701

661

661

652

656

Total Listed Capital - Rs.

313,267.23

405,646.32

470,427.47

519,270.17

582,040.70

New Companies Listed during the year

6

17

19

9

7

Listed Capital of New Companies - Rs.

4,562.60

66,837.00

30,090.28

14,789.76

44,763.93

New Debt Instruments Listed during the year

6

5

8

3

2

Listed Capital of New Debt Instruments - Rs.

2,749.00

4,775.00

10,900.00

3,400.00

4,000.00

Source: Karachi Stock Exchange

PRIVATIZATION THROUGH IPO'S

OGDCL sold 5% of shares which was the first privatization proceed through IPO's. Others privatization proceeds through IPO's were PPL (15%), KAPCO (20%) and UBL (4.2%). Aggregate sales price of these four proceeds is Rs18,385.60 million. According to privatization commission the upcoming transaction of IPO's are Habib Bank Ltd. and Pakistan Steels Mills.

Rs (in million)

UNIT NAME

SALE PRICE

DATE OF TRANSFER

BUYER NAME

Sale of 5% shares of OGDCL thru IPO

6,851.0

Nov-03

General Public thru Stock Exchange

Sale of 15% shares of PPL thru IPO

5,632.6

Jul-04

General Public thru Stock Exchange

Sale of 20% shares of KAPCO thru IPO

4,814.8

Apr-05

General Public thru Stock Exchange

UBL IPO (4.2%)

1,087.2

Aug-05

General Public thru Stock Exchange

Source: Privatization Commission of Pakistan

INTERNATIONAL OFFERING (GDR'S)

Government of Pakistan along with Privatization Commission has planned GDRs of United Bank Limited (UBL), National Bank of Pakistan (NBP) and Kot Addu Power Company (KAPCO) and later HBL and BOP will also be offered with proper sequencing during the next few months and efforts would be made to complete the same by the end of the current fiscal year.