Iran’s largest private automaker Kerman Khodro is hoping to raise capital by a public stock offering, an initiative that can shake things up and alter the status quo of Iran’s auto market.
According to Mizan Online, the corporation is not setting any restrictions for the purchase of stocks by the public or other companies, meaning the stock sales can lead to other auto manufacturers of the country claiming a share of the firm. Hamed Shadkam, deputy for the automotive group’s subsidiary Kerman Motor outlined the plan.
The move can reshuffle the status of automakers as SAIPA is racing toward the title of the largest auto manufacturer in the country and Iran Khodro is sparing no effort to sustain the prevailing state. Both firms are expected to be among eager bidders for Kerman Khodro shares.
Kerman Automotive Industries Group first engaged in the globally accepted practice the previous year, issuing one trillion rials ($23.8 million) of Murabaha bonds to finance its projects.
Murabaha bond is an Islamic financing structure, where an intermediary buys a property with free and clear title to it. The intermediary and the prospective buyer then agree upon a sale price (including an agreed upon profit for the intermediary) that can be made through a series of installments, or as a lump sum payment.
Initially, the automotive group will offer shares of its Kerman Motor subsidiary and later of the group itself.
Asked to specify details of Kerman Motors’ presence in the stock market, Shadkam said they will first acquire the necessary license from the Securities and Exchange Organization. The next step is to offer the company’s stocks in the market and at a subsequent time, other Kerman Khodro subsidiaries can follow suit.
On Solid Ground
Shadkam also outlined the firm’s last year achievements and future endeavors. “Last year we witnessed two significant developments, one was the company’s capital increase and other financing schemes through the issuance of Murabaha bonds. For the year which started in March, we plan to raise money via asset-backed securities and sale of stocks.”
Shadkam detailed Kerman Khodro’s entry into the capital market saying it will float 5-10% of its share in the stock market in the first phase.
In addition, during the first six months of this Iranian year which started in March, they will dispense two trillion rials ($47.6 million) worth of asset-backed securities with three-year maturity terms.
The deputy set forth the development plans of the corporation for this year, mentioning three objectives from increasing production capacity to opening new production lines and starting a new automotive paint line.
Both the previous offering and the upcoming have been arranged by Karamad Brokerage Co.
Company’s Status
Kerman Khodro is a private automotive company with several subsidiaries, namely Kerman Motor, Bam Khodro, Rayen Vehicle Manufacturing Company, Karmania and Rigan Khodro.
The subsidiaries are based in Bam Arg-e-Jadid Special Economic Zone near Kerman in central Iran. Some 200 other small, medium and large carmakers and parts suppliers operate in the SEZ.
Kerman Motor is also the official representative of South Korea’s Hyundai Motors and four Chinese carmakers JAC, BYD, Lifan, and Geely.
The corporation produced 44,231 vehicles in the year ending in March, up 5% compared to the previous year.
Kerman Khodro has produced 2,082 vehicles with BYD’s brand, a 289% year-on-year rise. As per its joint venture deal with Geely, the firm manufactured 1,069 cars, a notable 4,176% YoY increase.
Under the Hyundai brand, they made 7,293 vehicles, experiencing a stunning 606% YoY hike.
Moreover 25,331 JAC and 8,456 Liffan cars rolled out of the corporation’s production lines, down 13.5% and 23%, respectively.
The public offering can contribute to the company’s growth and accelerate its expansion.
