Pakistan’s largest shoe exporter raises $14.23 million to invest in Chinese tire company

KARACHI: Service Global Footwear Limited (SGFL), Pakistan’s largest shoe exporter, on Thursday raised $14.23 million (Rs 2.2 billion) in an oversubscribed two-day book building process at the Pakistan Stock Exchange (PSX), financial advisers for the transaction said.
Last month Service said it was planning an initial public offering in the domestic market to raise funds to invest in its parent’s tire joint venture.
Service Global Footwear is part of Service Industries Ltd., which has more than 13,000 employees and is known for its shoes and tires in Pakistan. The footwear unit supplies brands including Inditex SA’s Zara, Levi Strauss & Co.’s Dockers and Reckitt Benckiser Group Plc’s Scholl. The business has an annual revenue of about $44 million and exports to European countries such as Germany, France and Italy. It has a capacity to produce 3.6 million pairs of shoes annually.
Thursday’s book building was oversubscribed 5.8 times, with the price closing at Rs53.2 per share against the floor price of Rs38.
Arif Habib Limited (AHL), the financial adviser for the transaction, said the book building saw a total demand of Rs8.95 billion received against the issue size of Rs1.55 billion million. Service received offers for 172 million shares against 40.9 million offered in the book building.
Around 454 investors participated in the book building, including major commercial banks, insurance companies, local and foreign institutions, asset management companies, TREC holders and high net worth individuals.
“This was one of the largest participation by investors,” Shahid Ali Habib, CEO at Arif Habib Limited (AHL), told Arab News. “The market is highly liquid, the interest rate regime is low, and the best asset class at present in the market is equity. These are major factors that induced large investor participation … Investors are taking interest in the equities which have potential growth and expansion with high returns”. 
Service Global Footwear plans to use the IPO proceeds to buy about 18.91% stake in a joint venture set up by Service Industries and China’s Chaoyang Long March Tyre Co., Habib told media last month.
The joint venture, Service Long March Tyres (Private) Limited, is the first All Steel Radial Truck & bus (TBR) Tyre manufacturing unit in Pakistan. The project is expected to be completed by June this year.
SLM’s plant, estimated to cost Rs 16.43 billion, will have initial production capacity of 600,000 tires per annum — to be increased to 2,400,000 tires per annum by 2027 in three phases.