Fund raising through stock market slightly improved as 12 companies offered their shares worth Rs 6.258 billion in the IPOs (initial public offering) to general public during FY07 against the aggregate size of Rs 3.6 billion offered by nine companies in FY06.
Analyst says that the increase in size of IPOs in FY07 over that of FY06 was due to re-entry of the government through OGDC's second issue in the stock market.
OGDC's secondary offering accounted for 38 percent of the total issue size and 34 percent of the cumulative subscribed amount in FY07. On the other hand, subdued interest was observed by the private sector.
This could be linked to lack of tax incentives for listed companies (tax rates are at par with private and public listed companies) while the tough requirements of corporate governance has also restricted the IPO traffic in the last few years, said Faraz Farooq, an analyst at First Capital.
The equity offerings in the stock market during FY07 were, including Namco Balanced Fund worth Rs 300 million, We Balanced Fund Rs 100 million, Allied Rental Modaraba Rs 150 million, BMA Principal Guaranted Fund-1 Rs 50 million, Arif Habib Limited Rs 500 million, Hira Textile Mills Limited Rs 313 million, OGDC (second issue) Rs 2,366 million, Pace (Pak) Limited Rs 550 million, JS Abamco Limited Rs 1,300 million, Flying Cement Company Rs 140 million, Pervez Ahmed Securities Rs 250 million and Sitara Peroxide Rs 250 million.
Once again, the supply of fresh offerings was found to be lower than the demand. Against the offer size of Rs 6.3 billion in FY07, total subscription received amounted Rs 9.6 billion. This translates into average oversubscription of 1.5 times.
Amongst the 12 offering made in FY07, three were undersubscribed. This includes IPOs of two closed-ended mutual funds ie Namco Balanced Fund and WE Balanced Fund and a textile concern, Hira Textile Mills. Other than that, all offerings were oversubscribed (Sitara Peroxide result is still awaited). This shows that the demand for IPOs in the local market is much higher than the supply, said Faraz.
The IPO of Flying Cement caught the highest oversubscription of 3.8 times. This was followed by Arif Habib (2.7 times), Pace Pakistan (2.0 times) and JS Abamco (1.9 times). The secondary offering of OGDC was oversubscribed by 1.4 times.
The fund rising through market saw some improvement in FY07 though the supply was not adequate to meet the rising IPO appetite. While the performance of stock market is basically judged through the index change, the development of capital market could be evaluated by looking at the fresh capital injections via IPOs.
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