SECP Makes Amendments in Public Offering Regulations to Reduce IPO Costs

To attract new listings, improve capital formation & ease of doing business, the Securities and Exchange Commission of Pakistan (SECP) has amended the Public Offering Regulations 2017.

The commission has issued certain amendments to the Public Offering Regulations 2017 to promote capital formation by facilitating issuers, reducing the cost of an IPO and safeguarding the interest of the general public by enhancing disclosures.

The new regulations aim at rejuvenating the regulatory regime of initial public offerings. The apex regulator has issued SRO 1619(I)/2019 to amend the Public Offering Regulations 2017.

The objective eligibility criteria for listing of companies is being reviewed to enable companies that present a viable time-bound business plan to raise funds. Such companies are, however, required to comply with certain conditions including enhanced risk disclosures in the offering document for the information of prospective investors.

To help reduce the cost of an IPO, the role of consultant to the Issue and Book Runner may be performed by the same entity, provided such entity is independent of the issuer.

In order to safeguard the interest of the general public, certain parameters for greenfield projects (GFP) have been introduced. Through such parameters, sponsors of GFPs are required to have a successful business track record of running a listed company, contribute in the form of equity and financial close should be in place.

In the case of a greenfield project, the following criteria shall be applicable:

  • Sponsors’ contribution, in the form of equity in a greenfield project at the time of IPO, shall not be less than 51% of the entire equity and shall be retained till the commencement of commercial production.
  • In case the project requires debt financing, in addition to equity funding, financial close shall be mandatory.
  • Successful business track record of sponsors preferably running a listed company, manufacturing/industrial units, etc, considering various parameters such as operational profitability, operating cash flows, EPS and dividend payout, etc.
  • Experience and skills of the management to run the proposed project.
  • If required, Engineering, Procurement, and Construction (EPC) contracts shall be in place.
  • Land for the project, if required, is acquired by the issuer and is in the name of the issuer.

The sponsors of the issuer shall retain at least 51% of the post issue paid-up capital till the company reports net profit after tax for two consecutive financial years including profit from its core business activities. To ensure investor protection – in case of a change in the principal purpose of the issue – an exit offer mechanism has been issued.

Under the “Offering an Exit Opportunity” in case of a change in principal purpose of issue as disclosed in the prospectus: the issuer shall not, at any time change the principal purpose of the issue as disclosed in the prospectus.

In exceptional circumstances, the issuer may change the principal purpose of the issue subject to passing of the special resolution and offering an exit opportunity to dissenting shareholders who have not agreed to the change in principal purpose of the issue as disclosed in the Prospectus. You can further read the amendments here.


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