Equity Market Embraces 1st IPO in 5 Months

EghtesadOnline: After a five-month hiatus, an initial public offering made its return to the Iranian equity market on Tuesday.

News ID: ۷۷۷۸۱۱

22 July 2017

Experts believe this might just be the time, as stocks have stabilized after a few turbulent months and the IPO’s return can give impetus to the market.

The Tuesday IPO was for a 5% stake in Behpardakht Mellat (PRKT), made up of 47.5 million shares with its initial market capitalization standing at 950 billion rials ($25.13 million), TSE's website reported.

The public offering did not make it to the market’s regular trading hours. It started at 13:00, half an hour after the market’s close and was concluded at 15:30. With its final share price standing at 17,500 rials, PRKT’s final market cap rose to 16.62 trillion rials ($439.8 million). Its final price to earnings ratio stood at 6.5, which is 2.3 lower than the industry average and 4.5 lower than Behpardakht’s main rival, Asan Pardakht Persian, according to Financial Tribune.

Established in 2005, Behpardakht is a subsidiary of Bank Mellat and a payment service provider. Its services include Internet payment gateways, interactive voice system, unstructured supplementary service data, payment via smartphone apps, ATMs and cashless terminals.

"The company is one of the better performers in the industry and many investors seem ready to bet on it," Esmaeil Dargahi, Tehran Stock Exchange’s listing deputy, was quoted as saying by Bourse Press.

“The transparency and reputation of Bank Mellat prompted us to choose its subsidiary, Behpardkaht Mellat, from among the eight companies available to lead the new wave of IPOs.”

Before the recent IPO, all initial public offerings on the Iranian equity market had been suspended since early February.

According to Mohsen Khodabakhsh, an official with the Securities and Exchange Organization, the suspension was aimed at “supporting investors and preventing liquidity flight”.

Experts believe that SEO’s decision back then was due to the heavyweight Barkat Pharmed Company’s IPO, which caused a sudden movement of capital from the market due to its large size, as it indirectly pressured other smaller investors to sell.

The SEO was simply unable to further delay IPOs as “it was a short-term sedative for the market. The situation has now improved due to rising global commodity prices,” market analyst, Ali Nikougoftar, told Financial Tribune in a phone interview.

He noted that Behpardakht is "a good company in a good industry" and capable of attracting investors. But the main reason for SEO choosing Behpardakht seems to be its parent company’s dire need of cash.

“I believe the Economy Ministry has chosen to help improve Bank Mellat’s troubled financial situation by putting its subsidiary company in the front row,” he said.

Most Iranian banks, including Mellat, have been in hot waters for quite some time. It has been well over a year since the Central Bank of Iran mandated all banks to conform their financial statements to the International Financial Reporting Standards.

For banks dealing with loads of non-performing assets adopting IFRS meant laying bare all losses and a swift drop in value in the stock market. Most lenders invested heavily in troublesome assets such as real estate before the 2010 financial crisis and are now entangled in a quagmire of toxic assets.