First phase: Hascol Petroleum’s IPO receives positive response

Hascol Petroleum sells POL products through a network of 210 fuel stations across Pakistan. It plans to add another 50 retail outlets by the end of this year. PHOTO: FILE

KARACHI: 

The first phase of the initial public offering (IPO) of Hascol Petroleum has concluded with as many as 1,191 bidders taking part in the book-building portion, which was oversubscribed by more than seven times.

The capital issue of the oil marketing company consists of 25 million ordinary shares – or 27.6% of the company’s post-issue paid-up capital – with a face value of Rs10 each. The book-building portion, which took place on March 4 and 5, comprised 18.7 million ordinary shares, or 75% of the total issue size, at a floor price of Rs20 per share.

Institutional investors and high net worth individuals submitted bids of 132.5 million ordinary shares as opposed to 18.7 million shares that were up for grabs, which reflects the overwhelming response that the year’s first IPO has received.

Hascol Petroleum sells POL products through a network of 210 fuel stations across Pakistan. It plans to add another 50 retail outlets by the end of this year.

Speaking to The Express Tribune on Thursday, AKD Securities Head of Investment Banking Umair Aijaz said the offer’s book runners have determined the cut-off/strike price of Rs56.5 per share. The strike price was calculated through the Dutch Auction Method, an auction structure in which the price of the offering is set after taking all bids and determining the highest price at which the total offering can be sold.

AKD Securities is the book runner as well as joint lead manager and arranger to the issue along with Avais Hyder Liaquat Nauman Chartered Accountants.

“The response received from institutional investors and high net worth individuals is according to our expectations. We believe the general public will also participate in the IPO equally enthusiastically,” Aijaz said.

Referring to the remaining 25% of the total issue size, Aijaz noted that the public subscription will be held in either the last week of March or the first week of April. This means roughly 6.2 million ordinary shares will be issued to the general public at the rate of Rs56.5 per share – the price that has been determined during the book-building exercise.

The objective of the issue is to inject additional equity into the company for the completion of Machike storage facility in Sheikhupura and for setting up new retail outlets across Pakistan. About Rs200 million raised through the IPO will be spent on the storage facility while Rs100 million will be used to set up and commission new/under-construction retail fuel stations. Additional money will be utilised in meeting working capital requirements of the company.

Aijaz said Hascol Petroleum has managed to stay away from circular debt, which reflects well on the investment prospects from a retail investor’s point of view.

He said the company does not offer any unsecured credit (other than Rs250 million allowed to its franchise retail outlets). Moreover, its debt mainly comprises of fuel oil supplied to IPPs against irrevocable bank guarantees because of which the company has nothing to do with the circular debt issue.

The company’s profit after tax in fiscal 2013 was Rs392 million. It increased at an annualised rate of over 40% during the last four years.