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Promoting IPO in Pakistan

Promoting IPO in Pakistan. By Mr. Shahid Ali Habib Chief Executive Officer. Brief Profile. Leading Securities brokerage & Financial Services Firm Brokerage Operation since 1970 One of few listed securities brokerage houses Market Capitalization of 1.7 bn ( $ 17 mn )

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Promoting IPO in Pakistan

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  1. Promoting IPO in Pakistan

    By Mr. Shahid Ali Habib Chief Executive Officer
  2. Brief Profile Leading Securities brokerage & Financial Services Firm Brokerage Operation since 1970 One of few listed securities brokerage houses Market Capitalization of 1.7 bn ( $ 17 mn) Parent Company Market Capitalization of 11 bn ( $ 110 mn) 7 out of 13 equity issues over the last 3 years Around 7% market share in KSE traded volume Top 25 companies award for 2008 and 2009, none ever got CFA award for Corporate Finance and Equity Traders
  3. Overview of IPO Market IPO activity globally 2012 768 companies $ 118.5 bn 2011 1,225 companies $ 170 bn Local IPO activity - continuous decline over last 4 years 2012 3 companies 500 mn 2011 4 companies 4,479 mn 2010 6 companies 6,348 mn
  4. Promoting IPO Market Promotion and development of IPO market are dependent on following Secondary Market Valuations Regulators Government Issuers Advisors Automation Investors
  5. Secondary Market Valuation Higher market valuation invites IPOs Higher liquidity Lower debt yields or other instruments Existence of varied Investor Classes (Foreigners, Pension & Provident funds, Banks, Mutual Funds) Individual investors to follow big institutions
  6. Regulator’s Role Amendments in Capital Issue Rules are required One positive year of operation for asking premium should be removed one uniform criterion for loan-based projects and equity-based projects Requirement of project appraisal from financial institution should be removed Stock exchange verification of installation of P&E is not required This will reduce the cost of raising equity currently 5%-6% MNCs delisting should be eye opener for Regulators Regulators should give relaxation/remove few condition like: Minimum Application size; To collect 500 applications of 500 shares; increase the percentage of book building portion – currently 75% Delisting reasons should be addressed
  7. Government Providing fiscal benefits - Income Tax differential between Public and Private Companies Dividend withholding tax rate differential between listed & unlisted Disinvestment of some stake of government entities like in the past OGDC, PPL HBL Help discovering price for future privatization
  8. Advisor’s Role Need to have proper intelligence and research team to look for prospective issuers Shariah compliant issuers should be marketed Due diligence of an Issuer is a must! Should do proper in-depth analysis and valuation of the issuer’s business before bringing the Issue to Public; Proper firewalls between CF and brokerage to maintain confidentiality Ensure all material information is provided to investors/regulators for their own/independent assessment Advisory quality should be of utmost importance Experienced team to provide first-rate advisory services Extensive Road Shows to prospective Investors Country wide road shows to general public for wider participation
  9. Issuer’s Role Issuers should be encouraged for listing for expansion – key role for advisors Quality issues can easily attract wider interest and will multiply capitalizations Even in a challenging economies, companies prepared early for their IPO journey are best able to leverage the windows of IPO opportunity when market recovers; Disseminate appropriate and complete information to regulators, advisors and investors; Discuss its future plans with regulators, advisors and investors; Conduct Road shows, presentations and awareness media campaigns; Ensure transparent utilization of IPO proceeds; Keep its investors well informed by company’s strategy even after IPO
  10. Automation (User Friendly) Can increase general public investment in IPO by introducing electronic/online subscription methods – some initiatives have been taken recently in the IPO of Aisha Steel Mills Limited; Banks Collaboration is necessary for wider participation Automatic opening of CDC account Using ATM, Online and Mobile Banking Easy mode to attract non resident funds Awareness campaigns through print & electronic media Investor friendly process of application filing
  11. Investor’s Role Assess the IPO opportunity meticulously including, but not limited to: Sector analysis Economic analysis Company analysis Sponsors’ profile Comparative analysis, etc Attend investor presentations Carefully review/analyze the Prospectus/OFSD Follow the regulatory procedures Fundamentally strong scrip is a better investment opportunity than the speculative one!
  12. Thank You
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