LAHORE - Encouragingly, new fiscal year will commence with an initial public offering (IPO) of Aisha Steel Mills (ASML) at the Karachi Stock Exchange. ASML is a joint venture between Arif Habib Group, Metal One Japan and Universal Metal Corporation. The main operation of the company is the production of Cold Rolling Coil (CRC) which is a value added flat-rolled steel. The IPO subscription of the company will be held between 3rd and 4th July. Through this offer to the general public of 10 million shares at a price of Rs10 per share, the company intends to raise Rs100 million. To recall, the company has already raised Rs234 million through a pre-IPO placement to intuitional investors. We do not have a research recommendation on the company but some main positives worth mentioning are 1) prevailing demand supply gap of CRC and 2) involvement of Japanese partners who already have access to the steel distribution industry.

First incorporated as a public company in 2005, ASML is a joint venture and its core operation is to import Hot Roll Coil (HRC) and process it into Cold Rolled Coil (CRC) for sale. CRC is used in various industries ranging from Auto and Engineering to Home appliance and packaging. However, the main application of CRC will be within the auto and engineering industries. The installed capacity of the plant is 220,000 tons per annum and the management expects to commence commercial operations by the end of this month. Experts said the favourable demand supply gap within the steel industry in Pakistan bodes well for ASML.
The supply shortfall in Pakistan during FY11 stood at 408,000 tons and the company expects this shortfall to continue till 2015 and beyond. In terms of per capita steel consumption, Pakistan has among the lowest per capita steel consumption (14.8kg) compared to the regional average of 243kg. Hence, there is immense potential for growth in the long term. Moreover, the expertise of Japanese partners (i.e. Metal One, Universal Metal Corporation) will come in handy as they already have an established network within the steel industry.
Since the company’s commercial operations are yet to begin, the company reported a loss after tax of Rs42m in 1HFY12. However, the management expects the company to become profitable from FY13 onwards.