JANUARY 2014
Pakistan IPO Summit - 2014
Initial Public Offerings
Prospects & Challenges
By : Muhammad Farid Alam, FCA
Chief Executive Officer – AKD Securities Limited
Table of Contents
1. AKD Securities Limited:

Leading Corporate Brokerage House

Outstanding Investment Banking Credentials

Landmark Transactions

Investment Banking Prowess

Corporate Relationships
2. Benefits of Listing:

Unlimited Access to Global Capital

Unlocking the True Value of a Company

Creating Invest-omers

Wealth Creation

Succession Planning
3. Issues & Challenges:

Issues Faced by Financial Advisors

Issues Faced by a Company
4. The Way Ahead
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1. AKD Securities Limited
AKD Securities Limited
Leading Corporate Brokerage House
 AKD Securities Limited (“AKDS”) is one of the leading
securities firm in Pakistan with an 8% to 10% market
share in average daily traded volume at KSE.
 We provide a comprehensive range of investor focused
services, including equity brokerage, economic and
securities research, investment banking and financial
advisory services.
 AKDS Investment Banking prowess is well established
in the industry. Outside of the large domestic banks, we
have consistently been ranked among one of the leading
underwriters and arrangers of equity in capital markets
transactions.
AKDS has over 100 institutions, domestic and international, along with high
net-worth clients across several sectors including:
International Equity Funds
Leasing Companies & Modarbas
International Broker - Dealer
Arrangements
Mutual Funds & Investment
Companies
Commercial & Investment Banks
Corporate Provident & Pension Funds
Development Financial Institutions
Public & Private Sector Corporations
 From 2008 till date, AKD Securities Limited accounted
for 40% of all domestic equity offerings
 AKDS also provides access to a diversified investor
network through
sales/trading desks.
its
institutional
and
Deutsche Bank
online
Recipient of “Deal of the Year” Award at ICAP
Excellence Awards 2013 for Participation
Term Certificate of Treet Corporation Limited
“The Best Equity Brokera
House” Award for the yea
2005-06 and 2006–07, by CF
Association of Pakistan
Also featured as the second best
brokerage by Asia Money polls
in the year 2007
“Best Corporate Finance House of the Year” and
“Runner-up Best Brokerage House” Award 2010 2011 by the CFA Association of Pakistan
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AKD Securities Limited
Outstanding Investment Banking Credentials
Arrangement Capability
Recognition
Market Share
Successfully advised for and
arranged over
Ranked “Best Corporate Finance
House of the Year – Equity &
Advisory” for the year 2011
Successfully executed
PKR 45bn
43%
of the total 28 domestic equity
listings since CY2008 which clearly
reflects our investment banking
prowess in domestic capital markets
through equity listings, right
issuance, debt arrangements, equity
underwritings and term finance
certificates
for successfully executing landmark
transactions during the year
Innovation
Pioneer Book Runner
Privatization
Awarded “Best Transaction of the
Year” for the year 2012 by Institute
of Chartered Accountants of
Pakistan (ICAP)
A convincing market share of
Successfully advised and arranged
for transactions worth
70%
PKR 19bn
for Advisory & Arrangements of
Pakistan’s 1st ever PTC
representing our domination in all
domestic book buildings held in
Pakistan’s capital markets to date
based out of GoP’s Privatization
Program and are also mandated as
advisors for the GDR of NBP along
with the consortium of Deutsche
Bank AG and Morgan Stanley
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AKD Securities Limited
Investment Banking Prowess
Mergers &
Acquisitions
Includes buy / sell side advisory services to both local
and international clients. Services range from multistage M&A i.e. deal structuring, valuation,
divestment, structure optimization, target company
and JV identification
Corporate Bonds
Debt
Capital
Markets
Includes fund raising via Debt (both secured and
unsecured) and Equity issuance – IPO, OFS, Rights /
Bonus, SPO / FPO, Convertible Loan and Equity
Linked Instruments and Pre-IPO Placements (Private
Equity Placement)
Debt Arrangements
Mergers & Acquisitions
Privatization
Project
Finance
Providing advice on capital structure, determining
debt and equity strategy and arranging finance for
working capital requirements, expansion, acquisition,
refinancing with negotiation for key terms and
covenants
Business Restructuring
Public Offerings
Debt
Restructuring
Advisory on structuring secured and unsecured debt
facilities and negotiation for debt scheduling.
Performance feasibility analysis on plans of
reorganization as well as risk assessment and
opportunities
Equity
Merger &
Acquisitions
Private Placements
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AKD Securities Limited
Landmark Transactions
Lalpir Power
Limited
Highest Over-Subscribed Book Building: Acted as Lead Manager, Arranger & Book Runner for
the Offer for Sale of Shares where the Book Building of 28.48mn shares was over subscribed by 6
times which is the highest over-subscription received for any domestic Book Building.
Treet PTC
First Ever PTC in Pakistan’s Capital Markets: Acted as Financial Advisor & Arranger for the
first ever Participation Term Certificate in the history of Pakistan’s Capital Markets for Treet
Corporation Limited worth PKR 1,255mn.
Engro
Fertilizers
Limited
One of Pakistan’s Best Performing Listings: Acted as Book Runner for the Book Building of
75mn shares of Engro Fertilizers Limited at a floor price of PKR 20/- per share and received over
400 bids with an overwhelming response resulting in a strike price of PKR 28.25/- per share.
Attock
Petroleum
Pakistan’s Highest Ever Over-subscribed Offer for Sale of Shares: Lead Managed the PKR
577mn Offer for Sale of Shares of Attock Petroleum Limited that was over-subscribed by a
record 19 times.
National
Refinery
Privatization of Pakistan’s Second Largest Refinery: Buy-side Financial Advisor for the Attock
Group of Companies on their PKR 16,240mn Offer for the acquisition of 51% stake in National
Refinery Limited.
Ghani Gases
Limited
First Ever Domestic Book Building: Lead Manager & Book Runner for the first ever domestic
listing via Book Building mechanism for the Offer for Sale of Shares of Ghani Gases Limited.
Nishat Power
Limited
Re-opening of IPO Market: Acted as the Financial Advisor & Arranger for IPO of Nishat Power
Limited. AKDS reopened equity markets for Pakistan post domestic political volatility and a
deadlock in IPO market for nearly one year.
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AKD Securities Limited
Corporate Relationships
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2. The Benefits of Listing
The Benefits of Listing
Unlimited Access to Global Capital
Raise virtually unlimited money from markets all across the globe
Top 10 Largest Global IPOs
Company Name
Agricultural Bank of China
Industry
Financial Services
Size
$22.1bn
Year
Jul-10
Listed in
China
Industrial & Commercial Bank of China
Financial Services
$21.0bn
Oct-06
China
Automotive
$20.1bn
Nov-10
US
Insurance
$20.5bn
Oct-10
Hong Kong
Financial Services
$19.7bn
Mar-08
US
Social Media
$18.4bn
May-12
US
NTT Mobile Com. Network
Telecom
$18.1bn
Oct-98
Japan
ENEL S.p.A.
Utilities
$16.6bn
Nov-99
Italy
Nippon Telegraph & Telephone
Telecom
$13.7bn
Oct-86
Japan
Deutsche Telekom
Telecom
$12.5bn
Nov-96
Germany
General Motors
American International Assurance
Visa
Facebook
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The Benefits of Listing
Unlocking the True Valuation of a Company
Company’s true value is unlocked through price valuations
–
–
–
–
Market takes into account tangible & intangible assets' values
Growth potential is factored into the company's valuation
Market Value = Book Value of Assets + Future Earning
The secondary market helps to unlock the true value of a company
•
Floor Price of PKR 20/- share
•
Book Building helped in the price discovery where a strike
price of PKR 28.25/- per share was determined which also led
to an overwhelming response in the General Public
•
The share capital of Engro Fertilizers was PKR 12.28 billion
(USD 115mn) prior to the IPO
•
Post-listing with a share price of PKR 45.96/- per share as at
January 30, 2014 the total market capitalization of EFERT is
approximately PKR 59.65 billion (USD 561mn)
Pre-listing – PKR 12.28 billion
Post-listing – PKR 59.65 billion
PRICE DISCOVER IN ITS
TRUEST SENSE
Case in Point – IPO of Engro Fertilizers Limited:
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The Benefits of Listing
Creating Invest-omers
Investors of listed companies also become loyal customers
that creates ‘Invest-omers’
– Investors are more likely to buy products from the same company in which
they hold shares
– According to a study ‘inves-tomers’ spend 1.7 times more often than the
typical shopper and spend 1.5 times as much money
– They remain customers 1.1 times longer and generate 2.1 times the number of
business referrals (Source: Mowrey, 2000)
– MYER, an Australian chain of upmarket departmental stores, embraced the
‘inves-tomer strategy’ where shareholders were encouraged to become retail
customers and resultantly at least 60,000 new shareholders joined the register
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The Benefits of Listing
Wealth Creation
Listed companies provide an opportunity to create further riches
and are an indication of personal wealth for savvy entrepreneurs
– Majority of the richest men made their fortunes through appreciation of their
companies’ shares which is vindicated by the fact that all of the top 10 richest people in
the world owe their wealth to the stakes held in listed companies
– Carlos Slim is 2013's richest person with a wealth of USD 73 billion due to a rise in
Mexican Stock Market
– Mian Mohammad Mansha is the first Pakistani businessman to be featured in Forbes
list of billionaires due to the market value of his shareholdings in numerous listed bluechip companies
– Mukesh Ambani (Chairman – Reliance Industries) at one time became the richest man
in the world as result of increase in share prices
– Mark Zuckerberg became the youngest billionaire at the age of 28 years with an
estimated worth of USD 15 billion after the IPO of Facebook Inc.
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The Benefits of Listing
Succession Planning
The structure and required level of corporate governance
in listed companies supports in efficient and smooth succession planning
– According to a independent PWC research, 7 out of 10 private businesses do not have any
procedures for resolving business conflicts between family members and almost half of
them have no formal succession plans
– It is easier for listed companies to confront the problem of succession as it has better
access to human resource capital
– Leadership transitions in global conglomerates had negligible effects on the Company's
value:
 Steve Jobs - Apple
 Bill Gates - Microsoft
 Warren Buffet - Berkshire Hathaway
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The Benefits of Listing
Listing – A Winning Combination For All
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3. Issues & Challenges
Issues & Challenges
Challenges Faced by Financial Advisors
• Listing a company is not about just adding another number to the Exchange
• Lesser incentive for attracting successful companies
• Demanding , over-ambitious and impatient managements / sponsors
• Corporate governance and corporatization are the greatest fears of domestic sponsors
• Dilution of shareholding is considered a sin
• Company is considered a part of the family’s silver by the sponsors
• Sponsors / managements shy away from stringent regulatory reporting
• Inexperienced boutique investment banks mislead high potential companies
• Not willing to offer shares at ‘Patriotic Par’
• Listing in itself has great benefits – and benefits never come underwritten so comprises
are required…… At least initially!!!
“The only good companies stay unlisted”
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Issues & Challenges
Challenges Faced by Companies
• Absence of fiscal incentives is a great hurdle
• Lack of self-believe and level of preparedness in terms of financial reporting and
structuring of the Company
• Start-up companies have nowhere to go while only brownfield companies are
entertained
• Newcomers and single – entity sponsors are not welcomed
• Discomfort in sharing of information with outsiders
• Cost of listing
• Stringent regulatory deadlines at times delay processes
• Drive to grow and glow is missing
• Lack of trust in the eyes of potential investors
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4. The Way Ahead
The Way Ahead
STEP UP
PREPARE FOR LISTING
GROW & GLOW
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THANK YOU!
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