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Initial Public Offering (IPO) in Pakistan Capital Markets

Initial Public Offering (IPO) in Pakistan Capital Markets. Equity Market – KSE 100. Average Return 10 yr: 26% 5 yr: 36% 2 yr: 49%. Listed Vs Private Companies. Listed companies comprise less than 1% of total companies in Pakistan. Source: SECP. Why Private Companies do not go public?.

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Initial Public Offering (IPO) in Pakistan Capital Markets

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  1. Initial Public Offering (IPO) in Pakistan Capital Markets

  2. Equity Market – KSE 100 Average Return 10 yr: 26% 5 yr: 36% 2 yr: 49%

  3. Listed Vs Private Companies Listed companies comprise less than 1% of total companies in Pakistan Source: SECP

  4. Why Private Companies do not go public? Wealth and control sharing is a barrier • Dilution in wealth of family and partners • Dilution in control and governance • Share holder value dependent on market • Disclosure requirements/Confidentiality compromised • Interests of the minority investors • Cost of IPO • Process Complexity • Macro and market challenges

  5. Why Private Companies should go for public? Tangible financial and strategic value • Capital formation - significant source of capital now and in the future • Economic development, savings, re-investment • Cost effective compared to debt • Public becomes partner; with subordinated commitment vs lenders • Provides liquidity in selling • Bankability • Visibility due to public coverage • Unlocks real value of the company to shareholders

  6. Relaxed regulations way forward • Recently, regulators have recently taken measures to ease rules so as to encourage fresh issues • Examples of recent important changes: • If post-IPO paid up capital of the company is up to PKR 500m, at least 25% (50% previously) of such capital has to be offered to general public • If post-IPO paid up capital of the company is more than PKR 500m, public offer should be PKR 125m or 12.5% (25% previously), whichever is higher

  7. Book building • Book building refers to the process of generating, capturing, and recording investor demand for shares for the purpose of effective price discovery • A maximum of 75% capital can be offered through book building • More recently, we have seen an increasing interest to tap this aspect of IPO as more issuers are opting to go for book building • Book building helps general public by creating confidence in the strike price as institutional and high net worth players participate to determine this price

  8. REITs – The next big thing • REITs are expected to be introduced to the market during the ongoing year • This will allow small investors to access an asset class, previously generally reserved for high net worth individuals • REITs are expected to be launched as closed ended funds and will be made available to the general public through IPOs

  9. ThankYou

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