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ISLAMABAD: Pakistan's capital market is witnessing a significant activity in primary equity market, as the second Initial Public Offering (IPO) in a month has been witnessed at the Pakistan Stock Exchange (PSX) Wednesday.

Officials told Business Recorder Wednesday that the activity had resumed after a gap of 16 months, during which no IPO took place in the market.

However, four issues including the BankIslami Pakistan Limited (Sukuk), The Organic Meat Company Limited IPO, TPL Trakker Limited IPO and K-Electric Limited Sukuk have been launched at the PSX, while, according to the market sources, a number of potential companies have applied for the IPO at the PSX.

When contacted, Khalid Mirza Member SECP Policy Board said that recently the SECP and its policy board have rationalized and simplified the issue of capital whether by way of new offerings or right issues. Importantly, the regulatory clearance of new issues has been made disclosure based and any merit considerations have been removed in line with evolving global practice. This could contribute towards facilitating capital offerings, both equity and debt, Khalid Mirza added.

In April this year, the BankIslami Pakistan Limited, issued an additional tier 1 Sukuk instrument of PKR two billion to meet its capital adequacy requirements.

Out of the total issue size, Rs1.7 billion was privately placed and remaining Rs300 million was offered through IPO to the general public on April 20-21, 2020.

Despite the COVID-19 pandemic, IPO of BankIslami Sukuk was oversubscribed and significant interest was received from both institutional and retail investors.

In May, the Power Holding Limited (PHL), a public-sector entity owned by the Ministry of Energy, by launching a Shariah-compliant debt instrument "Sukuk" successfully raised Rs200 billion at a comparatively lower rate of return of six-month Kibor minus 10 basis points through competitive bidding at the PSX.

On the equity side, in the first week of July, the Organic Meat Company Limited (TOMC), which is a Halal meat processor and exporter of Pakistan, issued 40 million shares through 100 percent book building method at a floor price of PKR 18 per share.

Through 100 percent book building method, bidders are allowed to place bid for 100 percent of the issue size, and strike price is determined based on the entire issue size.

However, successful bidders are allotted only 75 percent of the issue size and remaining 25 percent of the issue size is offered to retail investors.

In case retail portion remains unsubscribed, the unsubscribed shares are allotted to successful bidders on pro rata basis.

Book Building of TOMC was held on July 3-7, 2020, and the book building portion of the issue was oversubscribed by 1.90 times.

The company received 136 bids of PKR 1,371,162,584 against an issue size of PKR 720,000,000.

The strike price determined through the book building process was PKR 20 shares as compared to floor price of Rs18 per share.

Moreover, the public subscription of TOMC, which was held on July 14-16, 2020 also got oversubscribed.

The public subscription of TPL Trakker (Private) Limited begun at the PSX on Wednesday, and will continue till Thursday (July 23).

The company has offered its 115.7 million shares to public, including the 57.4 million units that have been already sold through a green-shoe option in the underwriting phase at 12 rupees each.

The Company, TPL Trakker, Pakistani plans to raise Rs1.4 billion through the IPO to repay a loan, which will help them expand their business to the Middle East, and buy equipment.

The issue is fully underwritten by Habib Bank Limited, Bank Al-Habib Limited, Arif Habib Limited, and three other institutions.

According to the PSX officials, the K-Electric Limited, an electricity distribution company, also issuing a Musharakah Sukuk of up to Rs25,000 million, subscription of which will begin today (Thursday) at the PSX and will continue till August 20.

Out of total issue size, the K-Electric has already issued 94.8 percent of Rs23,708 million to the pre-IPO investors, while 5.2 percent (PKR 1,292 million) will be offered to the general public by way of public offering.

Pakistan's primary market faced a long dry spell of over 16 months as there was no public offering since March 2019.

The revamped IPO regulatory framework, introduced in January this year has made the IPO process easy and efficient as the timelines to approve an IPO application have been substantially reduced to 15 working days, from earlier period of three months.

The comprehensive public consultation during the preparations of new IPO regulations under taken by the Securities and Exchange (SEC) Policy Board resulted into removal of regulatory obstacles, and provided an efficient way for companies to tap capital market for fund raising.

In the new regulatory framework, listing eligibility criteria of issuers were relaxed and issuers having a track record of less than three years and profitable track record of less than two years have been allowed to raise funds through the PSX.

However, simultaneously, the information disclosure requirements have been significantly enhanced inline with international best practices, so investors can make informed decisions.

It is mandatory for companies to prominently highlight the details of loss and profit of company and risk involved in the IPO prospectus.

The new regulations also provide an exit opportunity mechanism for both the investors and the issuers.

Copyright Business Recorder, 2020

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