Aiesha Steel Mills IPO

Under present condition, when Initial Public Offerings (IPOs) are far and few, listing of Aisha Steel Mills Limited (ASML) at the start of the current fiscal year will help in lifting investors confidence in the domestic equity market. Incorporated in 2005, ASML is a joint venture between Arif Habib Corporation Limited, Metal One Corporation Japan and Universal Metal Corporation. The green field project is aimed at producing Cold Rolled Coil (CRC) with an initial annual capacity of 220,000 tons. The project is currently in its trial phase and slated to start manufacturing of saleable products in the 1QFY13. Industries such as automobiles and allied, engineering, home appliance and packaging are the major buyers of CRC. With a paid-up share capital of Rs.3.4 billion, the steel company managed to garner Rs.234 million from pre-IPO investors. While the public portion of ASML IPO comprises of 10 million ordinary shares at a price of Rs.10 per share, out of which 0.5 million shares have been allocated to the employees of the Company and the remaining 9.5 million shares have been set aside for the general public. The real drawing card for ASML is a huge supply deficit in the domestic industry, with local production standing at around 175,000 ton in 2011-nearly one third of the total domestic demand, according to ASMLs prospectus. In addition to sponsors strong financial backing, another trump card is Japanese partners affiliation with steel distribution and trading industry. When forecasting outlook for industrial goods manufacturers, it goes without saying that to a large extent the bottom-line performance of the manufacturers hinges on the outlook of production cost, raw material prices and currency movements. Moreover, higher interest rate could throw spanner in the works, with a debt to equity mix of around 63:37. With fewer shares (smaller IPO size) on sale, the market expects oversubscription of the issue. Subsequent to pre-IPO placement the Companys book value stood at Rs.8.79 per share. The market speculates that the sponsors are eyeing benefits beyond raising capital, given that the listing will result in goodwill creation and valuation benefits.