Iran’s Giant Pharma Holding Listed on TSE

A major pharmaceutical holding will go public by the end of this month, as part of a push to dampen the effect of upcoming corrections for equities.

Barkat Pharmed Co. was listed as Tehran Stock Exchange’s 506th company on Sunday. The Tehran-based holding is one of Iran’s largest pharmaceutical operators with 20 subsidiaries and claims to control 14% of Iran’s pharmaceutical market.

The company’s sole owner, Tadbir Economic Development Group, is selling a tenth of the 4.65 trillion rials (about $119 million at market exchange rate) in the company’s equity. 

Barkat’s IPO price is yet unknown, but given its rising profits and size in the past three years, based on the company’s prospectus, it is likely to attract long- and short-term investors. 

Its net profits rose 4% to 1 trillion rials ($22.57 million) in the last fiscal year (ended March 19, 2016), which marks a slowdown from the 26% hike in its profits from the previous year. The rise in Barkat’s operational profits is less impressive, though the holding is sitting on 1.1 trillion rials of cash it has retained from previous earnings.

The 10-trillion-rial company got the permission for the listing from TSE’s board in August. Though the company is going for an IPO, it is familiar with the workings of TSE. 

The holding has had some of its major subsidiaries on TSE for years, including its main investment arm Alborz Investment Company and most of its subsidiaries such as Sobhan Darou Pharmaceuticals Co., Iran Daru Co., Tolid Daru Co. and Alborz Darou Co.–each of them big names in Iran’s pharmaceutical industry in their own right.

Tadbir itself is a quasi-state company wholly owned by EIKO—the Execution of Imam Khomeini’s Order—a charity organization under the Leader’s authority with multi-sector business holdings. 

  The Tide of IPOs

TSE’s state is precarious, given 70 of its companies, which make up a tenth of its market cap, including some of the largest Iranian lenders, are halted. Many of these have faulty financial statements and are to announce losses. 

The upcoming bad news fuels worries about TSE’s performance and loss of investor confidence in the market. 

Thus, TSE executives have embarked on attracting fresh companies to their exchange in a bid to inject vigor to the market. The exchange is preparing for a huge wave of initial public offerings. Its executives have lined up 37 companies for listing in the coming months. 

At their vanguard is Barkat and right behind it is Jay Oil Co., Iran’s largest bitumen producer.

TSE executives say the companies will be accepted into the exchange before the end of March, but the actual IPOs will take longer to go through. 

While these IPOs may garner attention from investors, the bust coming from the reopening of halted companies and their price corrections are an unavoidable storm. TSE executives may actually find sluggish demand for IPOs from the shock of corrections, rather than see the shock dampened by avid demand for new stocks.

According to Esmaeil Dargahi, TSE’s listing deputy, the exchange is also reviewing Ghadir Electricity and Energy, a subsidiary of giant conglomerate Ghadir Investment Co., in the next two weeks. 

Ghadir investment company’s majority shareholders are a consortium of the armed forces pension and insurance organizations.