The Pakistan Stock Exchange (PSX) witnessed a dismal year for initial public offerings (IPOs) in 2023, with only one company going public and raising a meagre Rs435 million.
As reported by the brokerage firm Topline Securities, this is the lowest amount raised through IPOs in the past decade and half, and half of the previous record low of Rs800 million seen in 2013.
The number of IPOs also declined to a single one in 2023, after a similar trend in 2019. This is in sharp contrast to the previous five-year and 10-year averages of four IPOs per year.
Analysts attribute this poor performance of IPOs to macro-economic instability, coupled with the looming threat of default, cheap valuations and political uncertainty discouraging equity investment.
The only IPO that the PSX saw this year was of Symmetry Group (ticker: SYM) on the main board. This is Pakistan’s first publicly listed digital technology company with a focus on digitalisation of consumer-centric functions of organizations.
The company offered 101.24 million shares at a strike price of Rs4.3 per share, raising Rs435 million in August, 2023 with an oversubscription of 1.58 times.
The IPO market in Pakistan mirrored the global trend, where IPOs also dried up amid rising macro challenges, tighter liquidity, and higher cost of capital, the brokerage report added.
According to Ernst & Young (E&Y), a total of 968 IPOs were witnessed till the third quarter of 2023, raising $101 billion, compared to 1,018 IPOs raising $148 billion in the same period last year.
However, the stock market in Pakistan showed signs of recovery in the second half of 2023, after a lacklustre performance in the first half.
The benchmark KSE-100 index was up by only 3% in PKR and down 19% in US dollar in the first six months of 2023, with an average daily traded volume of 163 million shares and an average daily traded value of Rs6 billion.
In contrast, the index witnessed a sharp rally in the second half of 2023, and was up by 51% in PKR and 52% in US dollar till date, with an average daily traded volume in the cash/ready market improved to 377 million shares and Rs12 billion.
Analysts believe that this positive sentiment, if maintained, is likely to be capitalized by companies wishing to access external capital, which will lead to an uptick in companies applying to be listed at the PSX in 2024.
A new shorter IPO process has also been introduced by the PSX, where a 14 working-day limit has been placed for granting of regulatory approval to listing application and prospectus by the Securities and Exchange Commission of Pakistan (SECP), coupled with a 15-day limit on PSX for post-approval procedure for listing.
Analysts said that this standardisation will also help in more companies raising funds through IPOs in 2024.