Ghani Global plans IPO of its subsidiary

KARACHI: Ghani Global Group has expressed intention to spin out its subsidiary, Ghani Chemical Industries Limited (GCIL) through an initial public offering (IPO) at the Pakistan Stock Exchange, a bourse filing said on Monday.

The board of directors of Ghani Chemical Industries Limited, one of the subsidiary companies and the largest manufacturer of medical and industrial gases in Pakistan, has decided to make an IPO at the strike price to be determined through book-building process; and utilise the funds for the setting up of two state-of-the-art chemical plants for manufacturing of citric acid and sulphuric acid in the Allama lqbal Industrial City, Faisalabad, with an approximate cost of Rs8.5 billion.

The planned citric acid plant is envisaged to have a capacity of 60,000 tonnes/annum and sulphuric acid plant will have a capacity of 70,000 tonnes/annum.

After the ensuing financial structuring and IPO, Ghani Global will hold more than 50 per cent equity in the listed company with an expected valuation cap of Ghani Global’s holding in Ghani Chemicals coming approximately to Rs13 billion, based on Ghani Chemicals share price for the book-building process.

Ghani Chemicals also plans to set up a coal-based power plant to meet the energy requirements of its plants.

For the year ended June 30, 2021, Ghani Global posted a net profit of Rs1.09 billion, translating into the earnings per share (EPS) of Rs2.34.

Pacra ratings recognise Ghani Chemical Industries Limited’s leading and prominent position in the industrial and medical gases sector in terms of production capacity. The industry largely possesses an oligopolistic structure, benefiting the players.

The demand for medical gases in the health sector has significantly escalated during the third wave of the Covid-19 and is expected to sustain in short- to medium-term.

On the other side, the manufacturing and construction industry has comprehended recovery, which led to improved demand for industrial gases.

The company was able to capitalise growth from under-utilised free capacity, which was available as a result of the third 110 TPD plant expansion, and price rationalisation of medical and industrial gases, which were also witnessed from financial performance of the company recorded in the nine months of FY21.

The company’s margins, coverage and working capital cycle showed improvement at all levels. Cash flows of the company also posted a healthy growth. All the three plants are operational with higher capacity utilisation. The capacity expansions are under way and; currently, the company is setting up its fourth 105 TPD dedicated plant, which will cater to the needs of a renowned big industrial customer through a long-term sale contract and would play a vital role towards topline and bottom-line growth.

Ghani Chemicals also intends to set up the largest 275 TPD plant in Khyber-Pakhtunkhwa in future, as well.

Going forward, the company is expected to receive benefits from rising demand from industrial and medical gases, which will be translated into better financial performance and are evident in the future financial projections; capacity expansions with new plants and enhancement of current ratio of utilisation to ensure maximum production; and reduce reliance towards borrowings from the financial institutions.