Agha Steel Industries Ltd is planning Pakistan’s biggest-ever private sector initial public offering (IPO) this year to help boost output as China funds more than US$55 billion in infrastructure projects across the nation and a buoyant stock market spurs investor demand.
The Karachi-based company plans to raise as much as 10 billion Pakistani rupees (US$95.41 million) selling a 25 percent stake, executive director Hussain Agha said in an interview.
The sale would be the largest since the government stake sale of Habib Bank Ltd in 2007 worth 12 billion Pakistani rupees.
Steel and cement makers in Pakistan are expanding to meet demand as China’s “One Belt, One Road” initiative spurs construction.
The nation’s economy has grown at about 5 percent per year since 2013, encouraging Agha’s peers including International Steels Ltd and Aisha Steel Mills Ltd to lift production.
“You need roads, skyrises and housing,” Agha said. “Pakistan’s steel industry is in an infancy stage and growing at a massive pace — the whole environment will change.”
The company is to use the funds for a US$50 million expansion that could triple output to 500,000 tonnes within two years.
Production would then double to 1 million tonnes by 2023, he said.
Habib Bank has been appointed financial adviser, while Arif Habib Ltd and BMA Capital Ltd were picked as bookrunners for the transaction.
Pakistan’s steel output last year grew 23 percent to 3.6 million tonnes, the biggest gain among 40 nations, the World Steel Association said.
Agha Steel expects construction-grade steel, such as rebars and wire rods, to grow as much as 12 percent annually for the next three years.
The nation’s construction sector expanded 13 percent in the year ended June last year, more than twice the pace of the previous 12 months, the State Bank of Pakistan’s annual report said.
Rapid urbanization and rising income levels have left the nation with an annual shortfall of 500,000 homes, real-estate developer Arif Habib said.
“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, which has about 8 billion Pakistani rupees in stocks and bonds. “The government is also willing to protect companies with anti-dumping measures.”
In February, Pakistan imposed anti-dumping duties on Chinese imports of galvanized coils and sheets for five years to aid producers in a nation where steel usage per capita is almost half of its neighbor India, Agha said.
Favorable industry policies aside, some family-owned companies are also tapping investor demand that made the nation’s stock market Asia’s best performer last year.
Even so, less than six companies per year go public in Pakistan, a country where many businesses are conservative in risk taking and often unwilling to open their books to public scrutiny.
Amreli Steels Ltd has seen its shares more than double after raising 3.8 billion Pakistani rupees two years ago.
The company, whose products are similar to those manufactured by Agha Steel, has announced another expansion this month.
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