PABC plans to raise Rs3.3 billion through IPO

KARACHI: The Pakistan Aluminium Beverage Cans Limited (PABC) plans to raise around Rs3.3 billion by offering a 26 per cent stake to institutional and ordinary investors in an initial public offering (IPO) on the Pakistan Stock Exchange (PSX), a statement issued on Friday said.

The book-building will take place on June 22 and 23; followed by the public subscription on June 29 and 30.
The entire offer of 93.8 million ordinary shares, or 26 per cent of the post-IPO shareholding, will be offered through the book-building process at a floor price of Rs35/share. Successful bidders will be provisionally allotted only 75 per cent of the issue size and the remaining shares will be offered to the retail investors at the strike price, it said.

The PABC will raise at least Rs3.3 billion in the IPO but based on the interest from investors during the book-building process, the strike price can go up 40 per cent (Rs49/share); thus, helping the company collect Rs4.6 billion.

Ashmore Mauritius PABC Ltd, a specialist emerging markets investment manager based in Mauritius, currently holds 51 per cent shareholding in the company, while Liberty Group, a leading player in the textile and power sectors, owns the remaining 49 per cent stake.

With the exit of Ashmore post-IPO, Liberty Group, general public and Soorty Enterprises will own 54 per cent, 26 per cent and 20 per cent shareholding, respectively, in the company.

The company started its operations in 2017, as the country’s only local manufacturer of aluminum beverage cans. Until then, bottlers in Pakistan and Afghanistan relied on expensive imports to package their beverages in an environment-friendly aluminum cans.

The PABC Limited supplies to the bottlers of all major carbonated drinks, including PepsiCo and Coca-Cola, in both Pakistan and Afghanistan. Exports to Afghanistan constituted 35 per cent of the company’s sales in the calendar year 2020.

Established on a 20.9-acre piece of land in Faisalabad’s Special Economic Zone with a current rated capacity of 700 million cans/annum, the company continues to enjoy a 10-year tax holiday. It is increasing its rated capacity by almost 36 per cent to 950 million cans/annum by July next year.

The company has grown its revenue at an annualised rate of 18.7 per cent in the last five years. In the third full year of its operation (2020), its net profit amounted to Rs610.7 million, up 314 per cent from 2019. It expects its bottom line to grow at 140 per cent in 2021.

The Euromonitor International puts the size of Pakistan’s soft drinks market at 3.8 billion litres/annum. It expects the market to grow at a five-year annualised rate of 7 per cent to reach 5.3 billion litres in 2025 on the back of rising purchasing power, urbanisation and favourable demographics.

With the estimated market size of 275 million cans, the aluminium beverage cans in Pakistan accounted for only 3.6 per cent of the total soft drink sales as opposed to the global average of 19 per cent.

Growing can penetration may increase their sales to 650 million cans by 2025, delivering an annualised growth rate of 19 per year. The PABC Limited will be its key beneficiary, as the can imports are virtually non-existent due to high freight costs and duties.

PABC’s biggest export market is Afghanistan, as the country does not have local beverage glass manufacturing facilities. It commands over 50 per cent market share, thanks to its contracts with key beverage bottlers, including franchisees of Coca-Cola and Pepsi, in Afghanistan.

In addition, the company had recently signed agreements and initiated exports to leading beverage players in the United States. North America accounts for more than one-third of the global consumption of aluminium cans, mainly because of the environmental concerns. The company is also in discussion with key beverage bottlers in Bangladesh and Iraq.

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