By ARSHAD HUSSAIN
Pakistan Stock Exchange (PSX) witnessed only 3 initial public offerings (IPOs) during 2016, raising Rs 4.2 billion. This is significantly lower than last year’s 6 IPOs of Rs 116 billion, which was led by Habib Bank Limited’s (HBL) secondary offering of Rs 102.3 billion.
Few IPOs came despite strong market gains year to date (YTD).
Oil and banks heavy KSE-100 index generated total return of 43 percent in 2016 YTD after relatively flat performance in 2015. Price only KSE-100 index is up 41 percent YTD and had touched 47,000 points.
Strong market gains during 2016 are in line with those seen in 2013 and 2014 where the index posted above average returns of 49 percent and 27 percent, respectively.
Furthermore, this is better than last 10-Year average gain of 20 percent.
The 3 IPOs in 2016 comprised of Hi-Tech Lubricants (Rs 1.8 billion), Loads Limited (Rs 1.7 billion) and TPL Properties (Rs 0.7 billion). Two of the public offerings relate to sectors that have significantly outperformed market during 2016 YTD.
Loads Limited is a local auto parts manufacturer where local auto sector has posted gains of 68 percent YTD, highest gain in 2016.
Similarly, Hi-Tech Lubricants is part of local Oil Marketing Sector, which is up by phenomenal 60 percent during 2016 YTD. Both sectors have outperformed market gains of 43 percent.
The analysts expect some improvement in IPOs in 2017 as there are already a few companies that are vying for listing. However, with no big offerings from government, except State Life, the overall share supply will remain low.
The analysts said around 5-7 public offerings in following sectors are expected: Foods/Dairy, Banking, Information Technology, Media and Pharmaceuticals.
