KARACHI: Agha Steel has successfully raised some Rs 3.84 billion to introduce the state-of-the-art steel manufacturing "Micro Mill Danieli (MiDa) Technology" in Pakistan under its expansion plan. After the overwhelming response of the Initial Public Offer (IPO), Agha Steel Industries is all set to initiate the expansion plan and bring Pakistan's steel sector on the map of world's most advance steel manufacturers.
Agha Steel is setting up a Rs 7 billion MiDa project in Karachi, which will dramatically shorten the steel-making process and result in lower costs, higher turnover and reduced energy use in the line with the government's objective to support the construction industry.
Agha Steel Industries' IPO received overwhelming response from institutional investors and general public alike as book-building phase of the IPO was oversubscribing by 1.63 times, whereas the general public subscription of the 30 million shares (25 percent of the total offer size) was oversubscribed by 1.2 times. Overall, the company has raised Rs 3.84 billion for MiDa plant through the stock market listing, making it the largest IPO in the steel sector and the second-largest IPO in the private sector.
The company has already planned to use IPO proceeds to finance the expansion of its re-rolling capacity from 250,000 metric tons to 650,000 metric tons. It will also increase the reinforcing bar production capacity by 160 per cent.
Hussain Iqbal Agha CEO Agha Steel informed that the steel sector is anticipating steady growth in the company's bottom line owing to a substantial rise in construction activities across the country. Therefore, the company decided to expand its production capacity by brining latest technology into Pakistan, he added.
Current expansion move is in line with the company's successful completion of the first phase of capacity enhancement in which it installed a Danieli integrated shredded scrap automatic charging system, fumes treatment plant and Q-robot system alongside the robust BMR expansion of the rolling mill, he mentioned.
The main product of Agha Steel is reinforcing bars that are used in the construction of mega structures, roads, bridges, skyscrapers and homes. He said that expressed his gratitude to investors and their historic overwhelming response. He vowed to ensure growth of their shareholders' equity. Hussain informed that in addition to increasing the output of its final product, Agha Steel is also trying to create a market for high-grade billets in Pakistan.
Its state-of-the-art electric arc furnace can produce various types of billets that were impossible to make in the country until recently. The company is now making billets for low-carbon wire rods for the downstream industry, he added
Manufacturing rebar's through Electric Arc Furnace technology gives the company superiority in quality, allowing Agha Steel to be market leaders in the institutional and corporate segment.
He said that the company has a solid track record with a phenomenal compounded annual growth of 25% over the last 6 years with reference to the top line.
Hussain said that the company has supplied steel to landmark projects, such as Neelum Jhelum Hydropower Project, Bahria Town Karachi, Karachi Super Highway M9, FWO Project for Turbat/Ormara and Sindh Engro Coal Mining Company Ltd in recent years. Total steel demand in Pakistan is 7.1 million MT per year.
As per the market estimations, massive growth in steel and other construction raw material is expected in coming month owing to a number of large infrastructure projects, especially the China-Pakistan Economic Corridor (CPEC) and the Naya Pakistan Housing Scheme.
Agha Steel is also expecting demand for steel to stay high in the medium to long term. The country is among the lowest per-capita consumers of steel (about 43 kgs) as opposed to the regional average of 276kg and the global average of 214 kgs. The low-base factor presents an exceptional opportunity for the steel sector to grow many times over.
Copyright Business Recorder, 2020
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