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Agha Steel IPO oversubscribed by 1.63 times

Company will use IPO proceeds to finance expansion of re-rolling capacity

SAMAA | - Posted: Oct 7, 2020 | Last Updated: 6 months ago
Posted: Oct 7, 2020 | Last Updated: 6 months ago
Agha Steel IPO oversubscribed by 1.63 times

Photo: AFP

The book-building phase of the Initial Public Offer of Agha Steel Industries concluded on Wednesday with investors oversubscribing it by 1.63 times.

The company is in the process of listing on the Pakistan Stock Exchange through an IPO. It is looking to raise Rs3.6 billion at a floor price of Rs30 per share with a fresh issue of 120 million shares. The purpose of the issue is to partially fund the company’s expansion.

The steel industry in Pakistan has a huge potential, Hussain Agha, the company’s CEO, had told Samaa Money.

“The steel industry is in the infancy stage in Pakistan,” he said. “We are now on the verge of urbanization. Massive development is just around the corner.”

But according to AKD Research, the company’s upcoming glittering stock may not be having the shine it appears to have at the moment.

“Our discussion with various industry players shows a consensus on the view that the electrode and cost of keeping inventory partially offset the lower energy consumption gains,” the AKD Research report said. “The use of low-grade scrap compromises the quality of the final product.”

The strike price clocked in at Rs32 per share, higher than the floor price of Rs30, according to a press statement issued by the company on Wednesday.

This means Agha Steel is going to raise Rs3.8 billion in total, making it the largest IPO in the steel sector and the second-largest IPO in the private sector.

Brokers and investment advisory firms had issued almost unanimous calls to ‘subscribe,’ which resulted in investor demand amounting to Rs4.4 billion against the IPO’s book-building size of Rs2.7 billion.

The general public will subscribe to the remaining 30 million shares (25% of the total offer size) on October 14-15 at the strike price of Rs32.

The company will use IPO proceeds to finance the expansion of its re-rolling capacity from 250,000 metric tons to 650,000 MT. It will increase the reinforcing bar production capacity by 160 per cent.

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