By Moaaz Manzoor

Record investor participation in Service Long March Tyres Limited’s (SLM) initial public offering (IPO) is viewed by analysts as a sign of improving confidence in Pakistan’s manufacturing sector, particularly in export-oriented and import-substitution industries linked with China-backed industrial collaboration.

SLM’s two-day book-building process attracted bids worth around Rs69.4 billion ($250 million), oversubscribing the offer by 16.7 times and marking one of the strongest IPO responses in the history of the Pakistan Stock Exchange (PSX).

The transaction generated the highest volume of bids ever recorded for a PSX IPO and achieved its maximum fundraising target of Rs7.77 billion at the cap price, representing a 40 percent premium over the floor price. Earlier, the book-building process reached full subscription within the first five seconds of opening, making it one of the fastest subscription events witnessed in Pakistan’s capital market.

The strong response came despite broader market uncertainty in recent months, with institutional investors and high-net-worth individuals actively participating in the offering amid expectations of long-term industrial expansion and localization-driven growth.

Service Long March Tyres was incorporated in 2020 as a joint venture between Service Industries Limited, China’s Chaoyang Long March Tyre Company Limited and Myco Corporation Pakistan.

Commercial operations began in March 2022 at the company’s manufacturing facility located at SITE Nooriabad in Sindh, established on nearly 50 acres of Special Economic Zone land.

The company currently operates in the truck and bus radial tyre segment, supplying Pakistan’s transport and logistics sectors. However, investor attention has increasingly shifted to its planned expansion into the passenger car radial tyre market, where Pakistan remains heavily dependent on imports.

Under its expansion strategy, SLM plans to establish a dedicated passenger car tyre manufacturing facility, with commercial operations expected to begin in January 2028.

The proposed plant will initially have an annual production capacity of around two million tyres, which the company plans to increase to 2.5 million units in FY2029 and three million units by FY2030.

Management estimates place the company’s valuation at around $550 million and target a $1 billion valuation within the next two years through expansion into new product categories and increased production capacity.

Speaking with Wealth Pakistan, Syed Zafar Abbas, Manager at Zahid Latif Khan Securities, said the IPO’s complete subscription within the first five seconds reflected exceptionally strong demand at the floor price of Rs14.25 per share.

He said investor interest subsequently shifted toward the upper end of the price band, with the transaction reaching Rs19.95 per share, reflecting confidence in the company’s China-linked shareholding structure, export prospects and growth potential.

He added that such listings could deepen the capital market and strengthen investor participation as more IPOs are expected to enter the market during the year.

Muhammad Bilal Ejaz, Research Analyst at Ismail Iqbal Securities, told Wealth Pakistan that the heavy oversubscription reflected strong liquidity-driven investor appetite and robust short-term retail participation.

He said the response also suggested selective investor confidence in Pakistan’s industrial sector, particularly in import-substitution businesses such as tyre manufacturing and China-linked industrial partnerships, rather than a broad-based re-rating of the overall market.

Syed Basim Raza, Assistant Manager Research at NUST, said the robust IPO response reflected growing investor preference for companies tied to industrial expansion, localization and long-term manufacturing growth.

He said the company’s planned entry into the passenger car tyre segment could support Pakistan’s import-substitution efforts by reducing reliance on imported tyres while strengthening domestic value addition and industrial capacity.

Meanwhile, economic analyst AAH Soomro said, “there is a lot of appetite among investors for solid export and import-substituting value-added industries supported by local groups.”

He said plenty of liquidity was awaiting new investment ideas amid increasing digitisation-led retail investment participation.

“More such joint ventures are needed to widen the breadth of the PSX and further improve documentation and tax collection in the country,” he added.

Credit: INP-WealthPk