Air Link IPO: Book-building results in strike price of Rs71.5, offer oversubscribed 1.64 times

Book-building of Pakistan's smartphone producer Air Link has resulted in a strike price of Rs71.5 with the initial public offering (IPO) being oversubscribed 1.64 times at the end of the two-day process on Tuesday.

The company had planned on raising Rs5.85 billion, the largest private-sector IPO in Pakistan's history.

Bids for over 147 million shares were made against the offer for sale of 90 million shares. The company has raised Rs6.4 billion in the book-building process.

Back in 2019, textile giant Interloop Limited successfully raised Rs5.025 billion through the then- largest private-sector IPO.

Air Link looks to tap Pakistan's 'gold mine' as it gears up for IPO

“It is a historic moment, I am proud to be part of JS Global and consultant of Air Link,” said Muhammad Kamran Nasir, Chief Executive Officer of JS Global.

The company is one of the largest mobile phone distributors of Pakistan with a market share of around 20% within imported mobile phones, said Ismail Iqbal Securities. The total size of the IPO was Rs5.85bn at a floor price of Rs65, out of which 60 million would be new shares and the remaining 30 million would be offered for sale by the sponsor.

The company has started to manufacture mobile phones locally in Pakistan since April with a monthly capacity of 400,000 units per month, which is expected to reach up to 550,000 units per month by FY23.

Currently, the monthly production is 150,000 units and the management believes capacity would reach 100% utilisation by the end of CY21.

The company also plans to expand its retail network from 14 stores in FY21 to 150 stores by FY26 to enhance its presence in the retail zone. This would enable the company to pocket an additional 3-10% margins on retail sales.

Pakistan is ranked lowest in South Asia region with smartphone penetration of 18% versus 32% in Bangladesh and India, respectively.

Air Link management estimates annual smartphone demand of smartphones stands at 16mn, assuming a 22.6% penetration.

Air Link’s IPO comes as Pakistan saw a record streak of listings on the PSX with 8 IPOs offered in FY2020-21 alone, a significant jump from the figure of zero IPOs recorded in the previous fiscal year.

In 2009-10, 8 IPOs were made before the number touched 7 in FY15. However, 7 IPOs were conducted in three years combined, from FY18 to FY20, as Pakistan’s stock market was marred with an economic slowdown and political uncertainty.