According to a Pakistan Stock Exchange (PSX) notification released on 17 May, The Organic Meat Company Limited (TOMCL) has signed a Share Purchase Agreement (SPA) with the shareholders of Mohammad Saeed Mohammad Hussain Limited (MSMH), for the 100% shareholding acquisition of MSMH. This is done for a consideration of PKR 170,000.
MSMH is an existing offals processing company in the Karachi Export Processing Zone.
On the other hand, TOMCL is involved in the processing, sale and export of halal meat and related products. TOMCL was established in Pakistan as a private limited company in 2010.
Company background
Back in 2020, TOMC, one of Pakistan’s largest meat exporters, was to offer 40 million shares, or 35.7pc of its stake in the IPO, at a floor price of Rs18 per share, with a maximum price band of up to 40pc. Book-building registration for TOMC started on June 30 and closed on July 7, while the book-building bidding took place on July 3, 6 and 7. On July 3, or book building day one, bids for 20.63 million shares for the 40 million shares were received. By the end of July 7, bids for around 68.1 million shares were received from qualified investors for the 40 million offer, or bids worth around Rs1.4 billion. The strike price of the issue was Rs20, which is Rs2 higher than the floor price of Rs 18. The bidding featured both local and foreign high-net investors.
Analysts considered the turnout to be higher than expected, as investor response was sustained, despite an economic contraction, and the Covid-19 pandemic. In particular, the high participation rate of local and foreign investors suggest there is a growing appetite for IPOs in Pakistan.
TOMC’s IPO is Pakistan’s first IPO of 2020 and the first after fifteen months. Through the IPO, the company is looking to raise Rs720 million, mainly to set up an offal processing facility, and an offal production facility, both in Karachi. The remaining funds will be used to increase TOMC’s product portfolio.
Recent events
TOMCL has been expanding its business. Last month, it secured contracts to export pet food to Canada and meat products to Uzbekistan. Last year, it secured contracts worth $1 million to export food to Europe and the USA, emerging as “the first company from Pakistan to successfully export pet food to Europe, and also the pioneer to export the same to the American market earlier,” according to the company spokesperson.
Previously, Middle Eastern countries were TOMCL’s major export market. However, the company has been able to tap the American and European markets as well after adding pet food raw material to its portfolio. Moreover, the company holds thriving business in the Far East, Commonwealth of Independent States and South Asian markets.
Furthermore, it claims to be the first Pakistani company to begin the export of vacuum-packed fresh beef and the only company in the region to own technology for the vacuum packing and blast freezing of mutton and quarter beef carcasses.
The proposed transaction (100% shareholding acquisition of MSMH) is intended to ensure the successful completion of all the Company’s IPO commitments and signals a promising future for the company.
Diversification in terms of product categories and geographical areas will continue to fuel TOMCL’s growth trajectory. High sales volume combined with favorable pricing strategy will further enable this. However, high production costs, freight costs, finance costs as well as massive exchange gain on the back of Pak Rupee devaluation will persist as causes of concern for the company.
