PSX sees worst IPO performance in 15 years

December 06, 2023 (MLN): The Pakistan stock market witnessed a dismal performance in 2023, with only one Initial Public Offering (IPO) that raised a meager Rs435 million of funds, the lowest amount raised in the past decade and a half, according to a report by Brokerage House Topline Securities.

The previous record low for a year was Rs800m raised, which was seen in 2013.

In terms of the number of IPOs, PSX has yet again seen a single IPO after 2019, far below the previous 5-year and 10-year averages of four IPOs per year, it highlighted.

The report attributed this bad IPO trend to macroeconomic instability, coupled with the looming threat of default, cheap valuations, and political uncertainty discouraging equity investment.

The single IPO that the PSX saw this year was of Symmetry Group (PSX: SYM) on the main board. SYM is Pakistan's first publicly listed digital technology company with a focus digitalization of consumer-centric functions of organizations.

The company offered 101.24m shares at a strike price of Rs4.3 per share, raising Rs435m in August 2023 with an oversubscription of 1.58x.

Globally, a similar trend has also been seen where IPOs have dried up. As per Ernst Young (E&Y), a total of 968 IPOs were witnessed till 9M2023 raising $101 billion compared to 1,018 IPOs raising $148bn in the same period last year, Topline’s report noted.

This is attributed to rising macro challenges, tighter liquidity, and higher cost of capital.

The benchmark index of PSX, KSE-100, was up by only 3% in PKR terms in 1H2023,  while down 19% in US Dollar terms, with an average daily traded volume of 163m shares and an average daily traded value of Rs6bn.

However, in 2H2023 to date, the index witnessed a sharp recovery and is up by 51% in PKR terms, while up 52% in US Dollar terms.

Additionally, the average daily traded volume in the cash/ready market has improved to 377m shares and Rs12bn, the report highlighted.

“We believe, this positive sentiment if maintained, is likely to be capitalized by companies wishing to access external capital; which will lead to an uptick in companies applying to be listed at the PSX in 2024,” it added.

To note, a new shorter IPO process has recently been introduced in Pakistan, where a 14-working-day limit has been set for the SECP to grant regulatory approval to listing applications and prospectuses, along with a 15-day limit on the PSX for post-approval listing procedures.

“We believe this standardization will also help in more companies raising funds through IPOs in 2024.” it further noted.

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