ipo-secp
TRANSCRIPT
IPO d R l t F kIPOs and Regulatory Framework
Amir M. Khan Afridi Director (Capital Issues)
(Market Surveillance and Capital Issues Department), SMD, SECP
January 22, 2013January 22, 2013
1
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I i i lI i i l P bliP bli Off i (IPO)Off i (IPO) What is IPO:
Initial Initial Public Public Offering (IPO)Offering (IPO)
The first time sale of securities by a company to the public.One of the modes of fund raising by the corporates to meet their financial needs.
Wh IPO Why IPO:
The most common reason for a company to initiate an IPO is to raise more capital. Other reasons mayinclude monetization of the investments of early private investors, and to make the companypublicly traded enterprisespublicly traded enterprises.
Funds can be raised through IPOs through issuance of various types of securities like Ordinary Shares,Preference Shares, TFCs, PTCs, Sukuk etc.
Securities issued to the public are listed on the Stock Exchanges to provide the holders exit route.
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B fi f Li iB fi f Li i For Issuer:
Cost effective additional avenues for fund raising through the capital market
Benefits of ListingsBenefits of Listings
Cost effective additional avenues for fund raising through the capital market. Improvement in the income generating capacity. Improvement in the company’s credentials. Broadening of the shareholders base.
i f li d b Attainment of listed status by Issuer.
For Economy:I i i th f f t id b th k t i t di i Increase in revenue in the form of tax paid by the market intermediaries.
Decrease in dependence on banking sector. Increase in employment opportunities. Poverty reduction and rural development.y p Increase in corporatization culture. Global recognition of the Company and the capital market of the country. Increased contribution of the Company in GDP.
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B fi f Li iB fi f Li i C dC d
For Shareholders:
Benefits of Listings…..Benefits of Listings…..ContdContd
For Shareholders: Value creation and liquidity for shareholders
For Investors: For Investors: Investment opportunities for investors Ease of entry & exit
For the Capital Market: Boosting volumes at main Boards
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ProcedureProcedure for Listingfor Listing
Application to the concerned Stock Exchange for
Procedure Procedure for Listingfor Listing
listing under Section 9 of the Securities andExchange Ordinance, 1969 along-with all necessaryd i d d h Li i R l idocuments as required under the Listing Regulations.
Aft l f th St k E h th After clearance from the Stock Exchange, thecompany shall seek approval of the SECP underSection 57 or Section 62 of the CompaniesSection 57 or Section 62 of the CompaniesOrdinance, 1984 (the Ordinance).
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IssueIssue of Shares by a Company through IPOof Shares by a Company through IPO
For raising funds from the general public against issue of
Issue Issue of Shares by a Company through IPOof Shares by a Company through IPO
securities, a document named “Prospectus” inviting generalpublic for subscription of securities is required to be issued.
Prospectus is issued, circulated and published only afterapproval of the SECP under section 57 of the Ordinance.
Foreign company having place of business in Pakistan, canissue prospectus under section 461 read with section 57 of theissue prospectus under section 461 read with section 57 of theOrdinance.
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OffOff f S f S i i Sf S f S i i S Person who holds more than ten percent shares in a
b d ff f l h
Offer Offer for Sale of Shares by Existing Shareholderfor Sale of Shares by Existing Shareholder
company or a body corporate may offer for sale suchshares in totality or a part thereof to the general public.
Offer for sale document i.e. prospectus is published,issued and circulated after approval of the SECP undersection 62 read with section 57 of the Ordinancesection 62 read with section 57 of the Ordinance.
For sale of shares of a foreign company having place ofg p y g pbusiness in Pakistan, prospectus can be issued undersection 62 read with section 57 and 461 of the Ordinance.
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Eli ibiliEli ibili f Li if Li i Any public limited company or body corporate may
Eligibility Eligibility for Listingfor Listing
apply for listing on any Stock Exchange in Pakistan.
Minimum paid up capital of two hundred millionrupees (Rs.200 million).
A foreign company having place of business inP ki t l l f li ti St kPakistan can also apply for listing on a StockExchange in Pakistan.
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All iAll i f C i l i E i If C i l i E i I Post issue paid-up capital of the issuing company is up to Rs.500 million,
at least 50% of such capital shall be offered to the general public.
Allocation Allocation of Capital in Equity Issuesof Capital in Equity Issues
e s % o suc c p s be o e ed o e ge e pub c.
Capital of the issuing company is beyond Rs.500 million, public offer shallbe at least Rs.250 million or 25% of the post issue paid-up capital,whichever is higherwhichever is higher.
Offer for sale of shares by an existing shareholder, the offer size shall be atleast Rs. 100 million or 25% of the paid up capital of the companyp p p p ywhichever is lower.
Upto 5% of the issue size can be allocated to employees of the issuingcompanycompany.
Upto 20% of the issue size can be allocated to overseas Pakistanis.
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All iAll i f C i l i TFC If C i l i TFC I The total issue size is up to Rs. 500 million, at least
Allocation Allocation of Capital in TFCs Issuesof Capital in TFCs Issues
40% of the issue size shall be offered to the public.
The total issue size is beyond Rs. 500 million, thepublic offer shall be at least Rs. 200 million or 25%
f th t t l i i hi h i hi hof the total issue size, whichever is higher.
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P bli iP bli i f Pf P Prospectus to be circulated to the Stock Exchange at which the
company is listed or proposed to be listed and all the bankers
Publication Publication of Prospectusof Prospectus
company is listed or proposed to be listed and all the bankersto the issue in addition to make it available at the registeredoffice of the issuer.
Prospectus to be published at least in one Urdu and oneEnglish daily Newspaper.
Law allows publication of the prospectus in abridged form.
Prospectus should contain at least such material information Prospectus should contain at least such material informationand statements as required under Section 53 read with 2ndSchedule of the Ordinance.
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MajorMajor Disclosures in the ProspectusDisclosures in the Prospectus All material risk factors associated with investment in shares.
Financial information including latest balance sheet and five years income
Major Major Disclosures in the ProspectusDisclosures in the Prospectus
Financial information including latest balance sheet and five years incomestatement.
Purpose of the issue and utilization of the proceeds.
Dividend Policy of the company.
Overview and history information about the management including Overview and history, information about the management includingsponsor/ promoters.
Future business prospects of the Issuer.
Complete procedure regarding Book Building where the issue is throughBook Building.
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MajorMajor Disclosures in the ProspectusDisclosures in the Prospectus Complete procedure for making application both manually and
electronically (e-IPO), minimum amount of application, basis forallotment of shares, refund of subscription money to
Major Major Disclosures in the ProspectusDisclosures in the Prospectus
allotment of shares, refund of subscription money tounsuccessful applicants and minimum subscription for allotment.
Issue and dispatch of share certificates.p
Justification for premium being charged.
Underwriting commissions, brokerage and other expenses.
Warning for investors regarding prohibition of Submission ofW g o ves o s eg d g p o b o o Sub ss o omultiple and fictitious applications
Memorandum and Articles of Association.
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AdditionalAdditional Disclosures in case of TFCs ProspectusDisclosures in case of TFCs Prospectus
Details about the security backing the instrument in case ofsecured issue
Additional Additional Disclosures in case of TFCs ProspectusDisclosures in case of TFCs Prospectus
secured issue.
Redemption and profit payment Schedule.p p p y
Credit rating of the instrument and the entity.
Details about the Debt Security Trustee.
Details about call and put option, if any.
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MainMain Laws applicable to IPO’s and ListingLaws applicable to IPO’s and ListingRelevant laws applicable to listing of a company/security on a stock exchange and issue ofprospectus are as under:
1 P V f h O di l “P All I d T f f h
Main Main Laws applicable to IPO s and ListingLaws applicable to IPO s and Listing
1. Part V of the Ordinance namely, “Prospectus, Allotment, Issue and Transfer of shares and debentures, Deposits etc.” mainly section 53, 57 and 62 and second Schedule and Section 461 of part XIV of the Ordinance:http://www.secp.gov.pk/corporatelaws/pdf/CompaniesOrdinance984-17-03 2011.pdf
2 S i 9 f S i i & E h O di 19692. Section 9 of Securities & Exchange Ordinance, 1969: http://www.secp.gov.pk/corporatelaws/pdf/secord1969_sep08.pdf
3. The Companies (Issue of Capital) Rules, 1996: http://www.secp.gov.pk/corporatelaws/pdf/Feb_02_1996.pdf
4. Guidelines for the preparation of Prospectus: http://www.secp.gov.pk/otherlinks/GuidelinesChecklist/Guidelines.pdf
5. Guidelines for the issue of Term Finance Certificates (TFCs) to General Public. http://www secp gov pk/SECGuideSeries/PDF/Guidelines TFC pdfhttp://www.secp.gov.pk/SECGuideSeries/PDF/Guidelines_TFC.pdf
6. Listing Regulations of the Stock Exchanges: http://www.kse.net.pk
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MethodsMethods of Offering of Shares through IPOof Offering of Shares through IPOMethods Methods of Offering of Shares through IPOof Offering of Shares through IPO
Fixed Price Method
Book Building Method
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FixedFixed Price MethodPrice Method
Offer price is set by the issuer or the Offerer.P i b t t i t th b i f
Fixed Fixed Price Method Price Method
Price may be at par or at premium, set on the basis ofissuer/offerer own valuation based on the companies financialsand/or the prevalent market demand and/or the due diligenceconducted by the underwriters or Pre-IPO investors.
Issue is underwritten through independent institutions whichprovide comfort to the prospective investors as for as the offerprovide comfort to the prospective investors as for as the offerprice is concerned.
Basis of issue price is disclosed in the prospectus where theissuer gives detail about the qualitative and quantitative factorsjustifying the issue price.
Investors subscribe for the shares at the price already decided Investors subscribe for the shares at the price already decidedby the issuer.
181/31/2013Book Building Method Book Building Method Mechanism of price determination based on Dutch auction method. Floor Price is decided in consultation with the Book Runner and is disclosed in
the preliminary Prospectus. Indication of interest for investment in the shares offered is collected from
Institutional Investors (IIs) and High Net Worth Individual Investors (HNWIS)through making of bids during the bidding period.
Book is built and displayed online in descending order on the basis of bidsreceived from IIs and HNWIs which gives a picture of demand for the shares atdifferent price levels.p
Strike Price is determined at the end of the bidding period on the basis of bidsreceived.
Shares allocated to HNWIs and IIs at Strike Price Shares allocated to HNWIs and IIs at Strike Price. The Offer of shares to retail investor can be made at or below the strike price.
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Equity Issues During the last 21 Equity Issues During the last 21 years (1991years (1991--2012)2012)
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Equity Issues During the last 21 Equity Issues During the last 21 years (1991years (1991--2012)2012)
55.654
8680
90
100
50
60
25 64132.53861
73
60
70
80
40
panies
billion
15.283
5 595
25.641
17.895 22.635
14.56314.322
16.011
38 41
30 30
40
50
20
30
No. of C
omp
Rs. in
5.297
5.595 12.041
2.270.221 0 2.035
3.005
6.318
1.8583.961
8.556 7.403
4 1 03 4
4 4 9
14
3
119
36 4 6
0
10
20
0
10
YearPaid up Capital of Companies Listed During the Year (Rs. in billion)
Companies Listed During the yearCompanies Listed During the year
211/31/2013Listed Listed TFCs Issues During the last 18 yearsTFCs Issues During the last 18 years(1995(1995--2012)2012)(1995(1995 2012)2012)
221/31/2013Listed Listed TFCs Issues During the last 18 yearsTFCs Issues During the last 18 years(1995(1995--2012)2012)(1995(1995 2012)2012)
17 171830
16 6
25.917 17
15
14
12
14
16
20
25
ber o
f TFCs
ion
12.0
9.6
6 4 6 2
16.6
11.110.2
8.0
4
66 8
6
8
6
8
10
10
15 Num
b
Rs. in bill
0.7 1.30.0 0.6
1.9 1.2
6.4 6.2
4.0 4.3 3.02 2
0
23
12
2
0
2
4
0
5
Year
Amount (Rs. in billion) No. of TFCs's Floated
231/31/2013Some IPOs during 2005Some IPOs during 2005--20122012
S.No. Name of CompanySubscription
DateFormal
Listing DateOffer Price
(Rs.)
Price (as on Jan 18, 2012)
(Rs.)1 Attock Petroleum Limited 28-29 Jan 2005 7-Mar-05 57 75 500 101 Attock Petroleum Limited 28 29 Jan 2005 7 Mar 05 57.75 500.102 Kot Addu Power Company Limited 21-24 Feb 2005 18-Apr-05 30 50.023 United Bank Limited 03-08 Jun 2005 25-Jul-05 50 85.08
4EYE Television Network Limited
27-28 Jun 2005 8-Aug-05 10 23 554(Hum Network)
27 28 Jun 2005 8 Aug 05 10 23.55
5 Allied Rental Modaraba 28-Nov-06 8-Jan-07 10 31.506 Oil & Gas Development Co. Ltd. 11-13 Jan 2007 already listed 110 185.567 Sitara Peroxide Limited 13-14 Jun 2007 23-Jul-07 10 12 197 Sitara Peroxide Limited 13 14 Jun 2007 23 Jul 07 10 12.198 Invest & Finance Securities Limited 11-12 Feb 2008 20-Mar-08 10 11.499 Thatta Cement Limited 26-27 Feb 2008 07-Apr-08 22.5 25.0010 Nishat Power Limited 28-31 Aug 2009 07-Oct-09 10 19.4511 Nishat Chunian Power Limited 10-12 Sept 2009 22-Oct-09 10 20.7712 Ghani Gases Limited 02-03 Dec 2009 05-Jan-10 14 17.3513 Fatima Fertilizer Co. Limited 29-30 Jan 2010 08-Mar-10 13.5 25.5314 Engro Foods Limited 05-07 Jul 2011 10-Aug-11 25 98 9314 Engro Foods Limited 05-07 Jul 2011 10-Aug-11 25 98.93
241/31/2013Recent Reforms in Primary MarketRecent Reforms in Primary Market
Submission of application for shares by IPO investorselectronically by using internet banking facility i e 24 hrs access
ee--IPOIPO
electronically by using internet banking facility i.e 24 hrs access. Investors are not required to physically go to the Bank and wait in
long queues for making application for subscription of shares.g q g pp p e-IPO is efficient, cost effective and will lead to increase the
turnover. First ever e-IPO facility provided in the Offer for Sale of Shares
of Aisha Steel Mills (03-04 July 2012) through UBL’s e-IPOsystem.y
A Committee has been constituted by SECP To further broadenthis concept.
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RecentRecent Reforms in Primary MarketReforms in Primary Market Introduction and implementation of the concept of the book
building and e-IPO;
Recent Recent Reforms in Primary MarketReforms in Primary Market
g ; Formulation of guidelines for preparation of prospectus; Filing and examination of e-prospectus; Publication of the Listing Guide Book; Revision of the checklist of documents filed with application for
approval of prospectus and omission of the unnecessaryapproval of prospectus and omission of the unnecessary documents from the list to facilitate the issuers;
Provision of the option for dividend mandate in the IPO shares b i i f i f hi i h h ldsubscription form. Upon opting for this option, shareholders may
get their cash dividend through direct credit of cash in their bank accounts. (1st time used in Equity issue of International Steels Limited)( q y f )
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RecentRecent Reforms in Primary MarketReforms in Primary Market Provision of the option for Profit Payment/Redemption mandate
for TFCs subscription form. Upon opting for this
Recent Recent Reforms in Primary MarketReforms in Primary Market
p p p goption, applicants may get their profit payments/redemptionsthrough direct credit of Profit Payment/Redemption in their bankaccounts (1st time used in TFC issue of Engro Corporationaccounts. (1st time used in TFC issue of Engro CorporationLimited.)
Formation of a Technical Committee for the purpose to look as tohow the listing process can be made simple and efficient and howlisting of SMEs can be facilitatedlisting of SMEs can be facilitated.
Drafting of Issuance of Sukuk Regulations.
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Thank YThank Youou