Dairy firm plans stock listing

KARACHI: Lahore-based dairy company Al-Tahur Limited is planning a public share offer to fund an expansion in Karachi’s pure milk market, tapping into demand for food-related investments in the country.

Al-Tahur – a vertically integrated dairy company, aims to raise Rs733 million through selling 36.667 million shares, ie 25 percent of the post-IPO paid up capital, at a floor price of Rs20/share to fund part of its (approximately) Rs1.0 billion expansion. Al-Tahur would retain 75 percent stake in the listed company.

According to the public offering document submitted to the stock exchange on Wednesday, the proceeds would be utilised to increase herd size, expand farm, and boost plant and operational capacity.

The company also plans to cater to the untapped market of Karachi. “In order to do so, it would require additional logistical resources to ensure that the stock reaches the city in the shortest possible time, a dedicated distribution centre and delivery vans to deliver products to end clientele, and investment in human capital of the company in the region,” the document added.

Pakistan has one of the largest and highly fragmented milk industry in the world. Majority of the milk produced in the country originates from small farmers for local consumption, leading to uncertainty in quality.

The issues surrounding availability of quality of local milk create a strong demand, and consumers are willing to pay a premium for value dairy products. Hence, there is an immense potential of growth in this sector.

According to Food and Agriculture Organization (FAO) of the United Nations, Pakistan is among the three countries in Asia Pacific which are the world’s top dairy producing countries. Additionally, as per International Farms Comparison Network (IFCN) Dairy Report 2014, Pakistan is the 3rd largest milk producing country in the world.

It may be mentioned here that Dutch dairy giant Royal FrieslandCampina NV entered the market last year via acquisition.

Amongst the total production of milk in Pakistan, around 81 percent is used for human consumption whereas the rest is used for other purposes. Of the total human consumption only 3.0 percent is processed and packaged whereas the rest is sold as loose milk. Of the packaged milk market, 3.0 percent is sold as pasteurised milk whereas the rest is sold as ultra high treated (UHT).

The demand of pasteurised milk is expected to escalate following advancement in literacy and incomes, as has been witnessed in the developed world. After the recent reports by the Supreme Court of Pakistan and other concerned health departments regarding the dangers of using substandard milk, the demand for pasteurised milk has grown exponentially.

Over the past five years, Al-Tahur’s product sales witnessed strong cumulative average growth of 28 percent. “However, the company is still operating in a growth stage and has plenty of room for expansion by introducing new products to further enhance the company’s growth,” the document added. Al-Tahur would be the first purely dairy company to list at the Pakistan Stock Exchange.