International Packaging Films plans Rs2.15 billion IPO on PSX

KARACHI: The International Packaging Films Limited (Ipak) will raise Rs2.159 billion through an initial public offering (IPO) on the Pakistan Stock Exchange (PSX), as the company is in the process of three production facilities at the Quaid-e-Azam Business Park Special Economic Zone.

Ipak plans to sell Rs63.5 million, constituting 14.99 per cent of the total post-IPO paid-up capital of the company at a floor price of Rs34/share through the book-building method.

The International Packaging Films (Ipak) was founded in 2015 as a greenfield project to manufacture Biaxially-Oriented Polypropylene (BOPP) films. The company’s manufacturing facility is situated in Lahore, spanning over an area of 6.9 acres.

The main purpose of the issue is to invest the entire amount raised at the floor price, as equity investments in its wholly -owned subsidiaries Cast Packaging Films (Private) Limited (CPF), Global Packaging Films (Private) Limited (GPF) and 52 per cent owned Petpak Films (Private) Limited (PPF).

The total cost of these three projects is Rs13.80 billion. The rest will be funded by long-term bank financing, own cash flows and contributions by non-controlling groups.

Ipak has ventured into the manufacturing and selling of co-extrusion cast polypropylene (CPP) films through its wholly-owned subsidiary, Cast Packaging Films (Private) Limited. It commenced operations in April 2021. PPF, which is a greenfield project, was incorporated in Karachi, Pakistan as the private limited company on September 21, 2020 and it is a 52 per cent owned subsidiary of Ipak.

The principal purpose of PPF will be the manufacturing and sale of BOPET films. PPF is expected to commence commercial operations in April 2023. To meet the future demand of films locally, as well as in the international market, the company has decided to undertake a major greenfield expansion to enhance its BOPP Films capacity through its subsidiary GPF incorporated as a private limited company in Karachi, Pakistan on January 15, 2021. GPF is expected to commence commercial operations in June 2023.

“Any excess proceeds raised over the floor price would be utilised either to fund the internal working capital requirement of Ipak or to make equity investments in CPF, GPF and PPF, as deemed appropriate by the board,” Ipak’s prospectus notes.

“The reason for not opting to list CPF, GPF or PPF instead of Ipak is that the management of the company perceives that CPF has recently commenced operations, whereas GPF and PPF, being greenfield projects have not yet commenced its operations and might not be able to encash its potential as of now; hence, routing the proceeds through Ipak is a more feasible option.”

Ipak’s post-expansion product offerings will allow it to capitalise on distinct industrial users of BOPET and CPP packaging solutions. While some degree of overlap exists in the customers for BOPP, BOPET and CPP, the material characteristics of each are distinct, and diverge in terms of industry applications.

Accordingly, with the manufacturing capabilities extending to all three product segments, the company will have effective defensive characteristics, cushioning against softening demand trends for any one product category.

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