IPOs Make Comeback to Iran Capital Market

Initial public offerings on Iran's capital market are to resume after a gap of two months, with Omid Investment Bank floating 10% of its shares on Tehran Stock Exchange on Wednesday, the deputy head for markets at TSE said.

“The IPO includes 490 million shares of ‘OMID’ offered through book building in the 1,500-1,600-rial price range with a 10,000 share purchase quota for institutional and non-institutional investors,” Ali Sahrayi was also quoted as saying by Bourse Press.

Book building is a systematic process of generating, capturing and recording investor demand for shares during an IPO to support efficient price discovery.

Established in 2011, Omid Investment Bank is a securities and investment management firm with services, including strategic advisory assignments on mergers and acquisitions, restructurings, risk management, and debt and equity underwriting of public offerings.

Omid will be the 11th firm to have its IPO at TSE this fiscal year (started March 21). Its market capitalization currently stands at 4.9 trillion rials ($116.6 million) and its latest report forecast a 332-rial earning per share for the next fiscal year ending Dec. 2018, posting a 10% growth compared to the report before that.

The improved forecast was due to cost-cuttings in market making costs, growth in returns on bank deposits and reduced taxes, according to the firm’s data.

The capital market’s latest IPO occurred on Oct. 18 for the 7-trillion-rial ($175 million) Kish South Kaveh Steel Company, which was listed on TSE last year but was unsuccessful in floating its shares.

The two-month gap in IPOs was apparently due to the ongoing update of the trading system infrastructure, reporting firms’ new financial data and their major investors' reluctance to float their shares for the time.

It was followed by East Azarbaijan Pegah Company, Asia Seir Aras Company, Iran & Shargh Leasing Company, Rishmac, HiWeb, Chador Sazan Company, Parsian Kowsar Hotel, MobinOne Kish and Behpardakht Mellat respectively.

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

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

Late last year, several heavyweight IPOs had caused a sudden movement of capital from the market due to their large size, indirectly pressuring small investors to sell and finally prompting market regulators to stop public offerings until further notice.