Prime Minister Nawaz Sharif’s push to build power plants, roads and rail links is prompting a local steelmaker to expand by selling shares in the nation’s biggest initial public offering in eight years.
Amreli Steels Ltd, the South Asian country’s biggest maker of steel bars used in construction, plans to raise as much as 4 billion rupees ($39 million) next month from the sale of 70 million new shares, a report in Bloomberg said.
The proceeds will help more than double its capacity to 450,000 tons from 200,000 tons, Amreli’s Director Hadi Akberali said in an interview.
The steelmaker is betting on a potential boom in demand for the alloy as the $232 billion economy expands at the fastest pace in eight years, fuelled by higher remittances and consumer spending.
Last month, China signed deals for $28 billion of investments in Pakistan as part of a planned $45 billion economic corridor that includes power plants and dams.
“When your GDP is growing, your steel demand grows in multiples,” Akberali said. “If the Pakistan-China Economic Corridor takes off, even if we double or triple our capacity, I think it still won’t be enough.”
According to the paper, Amreli’s share offer also comes amid gains in the benchmark Karachi 100 Index, which, according to data compiled by Bloomberg, is the world’s second-best performer in the past six years. The gauge may rally 52 percent in the next two to three years, Stockholm-based Tundra Fonder AB fund manager Shamoon Tariq predicted in an April interview.
The benchmark index fell 0.3 percent to 32,749 as of 11:36am in Karachi. This year, it has climbed two percent.
The company will raise between two billion rupees and four billion rupees, depending on the final price, Akberali said, adding he expects strong demand. AKD Securities Ltd. and Bank Alfalah Ltd. will be the advisers on the transaction.
A four billion-rupee IPO would be the biggest in Pakistan since Habib Bank Ltd. raised 8.1 billion rupees in 2007, according to data compiled by Bloomberg. The number of initial share offerings rose to five in 2014, the most in six years, according to data compiled by Bloomberg.
“This clearly shows companies have the confidence to raise funds through the equity market,” said Muhammad Imran, a fund manager at NBP Fullerton Asset Management, which oversees 57 billion rupees in stocks and bonds in Karachi. “A new listing will also improve the depth of the market and choices.”
IMF Loans: A 930 million-rupee share sale in February by Mughal Iron & Steel Industries Ltd, a composite steel manufacturer, garnered demand for three times the amount on offer, with the price at the top end of the range.
Pakistan is making “significant progress” in meeting targets under its $6.6 billion loan programme, according to the International Monetary Fund. The institution this month predicted a 4.5 percent growth in the economy in the year starting July, following a 4.1 percent expansion in the current fiscal year.
The nation’s central bank on May 23 unexpectedly cut the benchmark interest rate to a 42-year low to spur growth.
