Stakes in Mansha’s profitable power plant up for grabs

By Kazim Alam, The Express Tribune

KARACHI: Few names inspire more investor confidence in Pakistan than that of Mian Muhammad Mansha, a man known for his ability to turn everything he touches into gold.

Known for turning around loss-making, state-owned entities, the man at the helm of the Nishat group presented the ‘offer for sale of shares’ in Lalpir Power Limited on Friday. Lalpir is an independent power-producing company owned by his conglomerate, which runs an oil-fired power station of a gross capacity of 362 megawatts in Muzaffargarh, Punjab.

The offer for sale of shares consists of 37.9 million ordinary shares – 10% of the total paid-up share capital of Lalpir Power – at an offer price of Rs15 per share (inclusive of a premium of Rs5 per share).

It comes with a ‘green shoe option’, which means that up to an additional 18.9 million ordinary shares – another 5% of the total paid-up capital – will be offered to the general public in case they oversubscribe to their ‘portion’ of the offer.

Explaining the offer’s mechanism, AKD Securities CEO Farid Alam said it consists of two portions: the general public portion and the book building portion. The book building portion of the offer consists of 28.4 million ordinary shares – which account for as much as 75% of the total offer – at a floor price of Rs15 per share.

Book building is a process whereby only institutional investors and high net worth individuals bid for a specific number of shares at various prices. AKD Securities and Next Capital, which are serving as arrangers and book runners for this offer, will maintain a record of all bids received from such investors.

They will then determine the cut-off/strike price through the Dutch Auction Method, an auction structure in which the price of the offering is set after taking all bids and determining the highest price at which the total offering can be sold.

The general public portion – which will be 25% of the total offer – will follow the book building process. It will be equal to, or at a discount to, the final determined price through the book building process.

According to Alam, the purpose of the offer is to list the company on Karachi and Lahore stock exchanges, expand the ownership base, improve the governance structure of the company and get access to an alternate capital resource.

Lalpir Power was earlier called AES Lalpir Private Limited, when it was incorporated in Pakistan in 1994 by AES Corporation of the US. However, the company was acquired in 2010 by a consortium comprising Nishat Mills (32% stake), Adamjee Insurance (8% stake), Security (2% stake), Security General Insurance (2% stake), Mian Hassan Mansha (8% stake), Engen Limited (20% stake) and Stanhope Investments (30% stake).

Each shareholder is going to sell 10% from its total stake in the company through this offer, Alam noted.

In fiscal 2012, the company’s revenues were Rs32.9 billion, up 10.9% annually. However, net profit in fiscal 2012 was Rs1.4 billion, slightly more than the preceding year’s corresponding figure.

The average dividend pay-out of the company has been 105% between fiscal 2008 and fiscal 2012. The floor price of Rs15 per share offers a calendar year 2012 (CY12) dividend yield of 20% (post bonus) as opposed to a CY12 dividend yield of 6.4% of the KSE-100 Index.

Published in The Express Tribune, June 8, 2013.

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