IFR International - 21.07.2018

KOOLEARN FILES US$250m HK IPO

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SGX set for first dual-class IPO

„ SINGAPORE Jubilant Pharma’s US$500m listing may be first under new rules

Singapore Exchange could see its first dual-class

share listing later this year as JUBILANT PHARMA, a

unit of India’s Jubilant Life Sciences, mulls such

a structure for an IPO of up to US$500m.

SGX last month allowed companies with

dual-class shares to list in the city, less than two

weeks before rival Hong Kong Exchanges and

Clearing celebrated the HK$42.6bn (US$5.4bn)

IPO of Xiaomi, its first involving a DCS.

SGX said companies with weighted voting

rights would be able to list on the main board

provided they meet certain criteria, such as

being fast-growing; the beneficiaries of the

WVR structure being integral to the company’s

success; and the company having the backing of

sophisticated investors.

The Singaporean bourse also introduced

safeguards designed to protect minority

investors. These include a requirement that all

appointments of independent directors and

auditors, as well as reverse takeovers or delisting

proposals, be carried out on a one-share, one-

vote basis. SGX also said each multiple voting

share would be capped at 10 votes a share.

“SGX’s DCS structure is more flexible,

allowing even non-tech companies to take

advantage,” an ECM banker said. In Hong Kong,

only “innovative” companies are allowed to issue

dual-class shares.

Jubilant Life Sciences declined to comment on

the planned DCS structure. The company, which

has interests in the chemical and pharmaceutical

sectors, has been working on the IPO since last

year, when it said Jubilant Pharma was planning

to list on an international exchange.

The equity dilution would be no more than

15%, it said at the time. The underwriting

syndicate IPO has not been finalised yet.

Jubilant Life Sciences has been trying to cut

its debt and unlock shareholder value by listing

the more profitable pharmaceutical business, a

Mumbai-based analyst said.

The parent trades at 10 times 2020 earnings

while Indian pharmaceutical companies trade at

20–22 times, he noted.

INVESTOR CAUTION

Although the Indian equity capital market has

been very active and has allowed companies to

raise funds locally at high valuations, bankers

said the DCS structure was attractive to

promoters looking to maintain greater control

over a listed entity.

In India, companies are not allowed to

complete an IPO with differential voting rights,

and only three companies (Tata Motors, Gujarat

NRE Coke and Future Enterprises) have sold

a second class of shares through follow-on

offerings.

However, securing an SGX listing may be

challenging given local investors’ wariness

towards foreign companies.

Earlier this year, Bangladesh’s Summit Power

International had to defer a US$260m SGX

IPO after a muted response. Typically, foreign

sponsors listing REITs and business trusts

on SGX have to pay higher yields than local

companies.

“Singapore investors are more comfortable

with the home-grown Ascendas, Keppel and

Mapletree groups. Any other emerging market

issuer has to overcome a tall wall of scepticism,”

another ECM banker said.

Indian listings have been rare in the city. RHT

Health Trust, sponsored by Fortis Healthcare,

was the last Indian entity to list on the SGX

through a business trust IPO of S$510m

(US$373m) in 2012.

Between 2012 and 2014 India’s Reliance

Communications, L&T Infrastructure Development

Projects, Infrastructure Leasing & Financial

Services and Moser Baer Projects tried listing

business trusts on the SGX but gave up after

investors demanded 10%–12% annual yields.

Singapore-based Jubilant Pharma

manufactures and supplies active pharmaceutical

ingredients, formulations, radiopharmaceuticals

and allergy therapy products.

It reported revenue of US$427m in the nine

months to December 31, up from US$342m a

year earlier. Profit after tax fell to US$43m from

US$52m over the same period.

S Anuradha