Resuscitating the primary share market.

Byline: Dilawar Hussain

Last Wednesday, the apex regulator of the share market, the Securities and Exchange Commission of Pakistan (SECP), proposed amendments to the Initial Public Offering (IPO) Regulations, 2017.

SECP Chairman Aamir Khan affirmed that the proposed amendments were meant to 'make the IPO process more easy, simple and cost-effective'. The market is relieved that the IPO regulations have finally caught the eye of the regulator.

Early this year, when Interloop Ltd set out to raise Rs4.9 billion by offering a 12.5 per cent stake in the company, it was billed as the largest private-sector IPO in Pakistan. Starved over the years for a new issue of the kind, investors were jubilant. The size of the IPO by the largest hosiery producer in Pakistan was bigger than the total funds of Rs4.32bn that all the three IPOs offered in 2018 raised collectively.

Then finance minister Asad Umar could not contain his excitement. He took to Twitter and congratulated the nation. 'This is the biggest equity issue ever by a Pakistani private-sector company and particularly pleasing that it's an exporting company.'

The issue was oversubscribed with the company being able to raise Rs5.025bn. It made its place among the 50 largest companies listed on the Pakistan Stock Exchange (PSX) by market capitalisation.

'It makes sense to raise money from the stock market as bank financing is expensive owing to high interest rates'

But the market was impressed less by Interloop Ltd itself and more by what it thought was the end of the drought in the primary equity market. There were great expectations about other issues that might follow. That, however, has not been the case. The Interloop offer in March this year has been one in isolation.

The quotation sheet of the PSX shows a list of about one dozen companies that are waiting to enter the market. The prospectus of one company has been approved by the regulator, but the offer continues to elude the market.

Investors have an insatiable appetite for new issues, but the companies have opted to stay out. One major reason is surely the meltdown in the secondary market that is in its third year, causing a loss of billions of rupees to investors. 'With the price of blue-chips now quoting at a 40pc discount to their market values in 2017, prospective sponsors wonder if their offer will be greeted with a warm response from investors,' said an entrepreneur running a pharmaceutical business.

An asset manager of a mid-sized...

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