DOL 32.5m ordinary shares IPO today

KARACHI - The Descon Oxychem Limited (DOL) is going to conduct an initial public offer (IPO) of 32.5m ordinary shares at par value of Rs10 per share to the general public out of a total capital of Rs102.0m. The IPO is scheduled for August 6-7, 2008.
It was revealed in an analyst briefing held on Monday to provide a background of the company and its product. Analysts were of the view that DOL’s IPO will present an attractive opportunity for exposure in the growing Pakistan chemical sector.
DOL is backed by a strong sponsor in the form of Descon Enterprises (49 per cent holding) whose core businesses pertain to engineering, chemicals, and power. It is a well diversified group that has a strong foothold in Pakistan as well as the Middle East region, with annual revenues of over USD400mn. Descon engineering is the leading construction and engineering services company of Pakistan, operating in a multitude of sectors. DOL was established to set up a production facility for all product variants of hydrogen peroxide (H202). The company is expected to have a production capacity of 30,000MT per annum at an estimated cost of PKR2.5 billion.
H202 is an environmentally friendly chemical that has numerous uses as a bleaching agent, disinfectant and preservative. With Pakistan’s existing production capacity of 30k tons (Sitara Peroxide) and an annual demand of 58k tons in CY07A, the balance of demand for H202 was catered through imports in the past. DOL’s plant is expected to help bridge the local demand and supply gap.
The principal demand drivers for the product are the textile and paper and board industries. Currently 90 per cent of domestic demand is being utilized in the textile sector as a bleaching and desizing agent. Globally, 50 per cent of the paper and pulp industry has adopted the use of H202 as a bleaching agent. In Pakistan, the paper and board industry is growing steadily with two leading manufacturers increasing capacity by 200k in CY08E. Going forward, future demand will be led by growth in the paper products industry. Demand for H202 is expected to reach 100k tons in the next five years.