As the news makes it to the media, Munir Bana – CEO of Loads Limited, insisted many of his company employees to purchase the auto parts making company’s shares as date of the book-building sector of the IPO came near. Since this was a risky step, many of his employees hesitated to take the step while others agreed to develop personal shares in the organization’s development plan.
As the events took turn, those who didn’t buy any shares only found remorse as the shares prices rose proving the investment in Loads Limited to be a grand idea.
Within a few weeks, the share price of Loads Limited crossed the 100% mark in the last listing on the Pakistan Stock Exchange in 2016. Currently valued at Rs 56.76, the company had begun the journey at a rate of Rs 34 and by now has also given out 10% bonus shares and Rs 1 as profit to its shareholders.
The CEO of Loads Limited, Munir Bana stated:
“Our employees were hesitant to enter the stock market, but when I insisted many of them bought the company’s shares. Those who did not buy or purchase just a few shares now regret (their decision)”
Initial Shares
Loads Limited initially offered 2.5 million shares to its employees before offering them 50 million shares through the IPO. This step was taken in order to engage the employees in the company’s future investment plans. The organization in the long run figured out how to raise Rs1.7 billion, a sum the organization is presently utilizing for extension of its production capacity.
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The company is involved in the production of radiators, mufflers, exhaust systems, sheet metal components and other auto parts. Loads Limited is one of the best auto parts makers in the country and has clients all over the world including national and multinational companies involved in the manufacturing of cars, heavy machinery, and motorcycles.
The Two Game Changers
According to Munir Bana, the sudden rise in the company shares has been possible due to two main developments. The first one is the China-Pakistan Economic Corridor (CPEC) while the second one is the Automotive Development Policy (ADP) launched in March 2016. CPEC has proved to be a great share lifter as the $55 billion project has changed China’s way of managing trade.
According to industry experts, the auto parts industry will benefit greatly from CPEC as the project will aim to develop and renovate Pakistan’s roads, motorways and highway networks.
It is estimated that the project would require heavy machinery during the construction as well as after the completion of the construction. Bana commented:
“New entrants and new models, as well as the increase in heavy vehicles, all speak for themselves. The growth in the heavy vehicle segment is faster than in the passenger cars — and both groups are part of our customer base. Therefore, I am quite optimistic about the auto part making industry”
The span of Pakistan’s automobile part making industry now surpasses $1.5 billion. Out of more than 1,200 little and medium-sized ventures, there are around 278 tier-one part manufacturers. Despite the fact that Pakistan exports to more than 56 nations, yearly receipts stay in the scope of $100-$150 million simply because only twelve organizations are able to reach out to the foreign markets.
After a long stretch of curbed development, attributable to various elements including the surge of imported vehicles the auto parts making industry is preparing for expanded deals. Other than motorcycles and tractors, it will now also concentrate on heavy vehicles and local cars.
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The main customers of the company include Original Equipment Manufacturers (OEMs) such as Honda and Suzuki. Other than that, the company also sells its products to the secondary market. These sales amount for only 5% of the total revenue of the company.
Bana said that the company is looking forward to launch new models in the coming year. He also said that:
“Our own business is growing well at the moment through increased volumes on the back of new models launched by existing OEMs”
New Industries
As the auto industry is starting to progress in Pakistan, big companies like Renault, Kia, Hyundai and Audi have shown their interest to assemble their vehicles in Pakistan.
This could serves as a bonus for Loads Limited as there is growth in car sales and new entrants are likely to reach out to Loads Limited for auto parts. While speaking about the potential entrants, he stated:
“The intentions of new entrants look good, because they have picked reputable and reliable local partners. But compared to luxury brands like BMW and Audi, I am more excited about those players that have economical cars because they will give me more volume. But because of the long gestation period, especially for setting up brand new plants, I am not counting my eggs before they hatch”
Pakistan is now engaged in arranging Free Trade Agreements (FTAs) with Thailand and Turkey and has also decided to renegotiate its FTA with China. All these countries have well developed automobile industries and the manufacturers in Pakistan fear that this will have a negative effect on their business.
It was stated:
“There is pressure on us to open the auto sector for duty-free imports; literally, these countries want to replace the auto policy tariffs with concessionary duties. This would destroy our industry”
The trend of flourishing auto industry is conditional to permanency of government policies and the ADP 2016-21 as this will help the manufacturers stay in business and carry out their investment plans.
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