The biggest private sector initial public offering is being planned by Agha Steel Industries Ltd this year to help increase output as China funds massive development and infrastructure projects across the nation.
The company is based in Karachi and plans to raise around Rs 10 billion, said Executive Director Hussain Agha. The IPO will offer a 25% stake in the company.
Steel and cement makers are increasing production to meet the demand as the “One Belt, One Road” initiative of China materialises.
“You need roads, sky rises and housing,” said Agha. “Pakistan’s steel industry is in an infancy stage and growing at a massive pace — the whole environment will change.”
The company will use the funds for $50 million expansion that will triple output to 500,000 metric tonnes within two years. Production will then double to a million tonnes by 2023, he said.
The steel output of Pakistan grew by 23% in 2016, the biggest gain among 40 nations. Agha Steel expects the construction-grade steel to grow by 12% annually for the next three years.
The construction sector observed a 13% growth in 2016, which is twice the pace witnessed in the previous year, says the State Bank of Pakistan annual report. Urbanisation and increased income levels have left the nation with an annual shortfall of 500,000 homes, says Arif Habib.
“Real-estate is the main engine for this growth, it has really picked up,” said Ayub Khuhro, chief investment officer of Karachi-based Faysal Asset Management Ltd. “The government is also willing to protect companies with anti-dumping measures.”
In February, Pakistan imposed anti-dumping duty on Chinese imports of galvanised coils and sheets for five years to protect domestic producers, said Mr Agha.
Amreli Steels Ltd. has seen its shares more than double after raising 3.8 billion rupees two years ago. The company, whose products are similar to those manufactured by Agha Steel, has announced another expansion this month.
Courtesy Bloomberg
