ABHI's IPO priced 3 percent above the floor, at half the value its own prospectus gives

ABHI Microfinance Bank sold the 99 million shares in its book build at Rs15.50 on 6 November, 50 paisa above the Rs15 floor and far below the Rs22.50 ceiling of its price band. Bids totalled 157.17 million shares, yet the pattern of those bids, and the gap between the strike and the lead managers' own valuation of the bank, say more about the offer than the headline cover does.

The book build raised Rs1.534 billion. The remaining 33 million shares go to the public on 12 and 13 November at the same price, which adds Rs511.5 million and brings the total to Rs2.046 billion for 132 million shares. At the ceiling the same shares would have raised Rs2.97 billion.

Demand that thins above the floor

Bids at the floor price covered about 159 percent of the 99 million shares on offer. At the strike the cover was about 106 percent. Working from those two ratios, roughly 105 million shares were still bidding at Rs15.50, so about 52 million shares, a third of all bids, dropped out in a single 50 paisa step. In a book build, bids are ranked from the highest price down and the strike is the highest price at which the whole offer is covered. Here the book was full by only about 6 percent.

Tasdeeq, the credit bureau that listed in August, shows what a deep book looks like. Its band ran from Rs1.90 to Rs3.00, bids reached 21.53 times the shares offered, and it struck at the top of the band, Rs3. ABHI struck 3.33 percent above its floor. Both offers were priced by the same mechanism on the same exchange within three months.

What the price implies

The draft prospectus counts 834.9 million shares today and 966.9 million after the 132 million new ones. Its valuation section uses a larger figure, 1,167 million, because it adds 200 million shares to be issued against a Rs2 billion advance that the sponsor, ABHI (Private) Limited, has already paid in, pending approval from the Securities and Exchange Commission of Pakistan. That advance converts at Rs10 a share, the par value, against the Rs15.50 the public pays. On the larger count the public's 132 million shares are 11.3 percent of the company, not the 13.65 percent on the cover.

On that count the strike values the bank at about Rs18.1 billion. The prospectus puts the same equity at Rs35.9 billion, or Rs30.80 a share, using a price to book and return on equity method with a cash flow check. The strike is therefore 50 percent of the lead managers' estimate. Against forecast profit of Rs2.927 billion for 2026, of which Rs1.501 billion was earned in the first half, the strike is about 6.2 times earnings. The KSE 100 stood at 7.21 times in the Adal Fintech draft prospectus dated 30 October. On earnings alone the bank is priced slightly below the market, and the price does not appear to reflect the capital gap that follows.

The capital gap the offer does not close

The balance sheet explains the discount. The bank's capital adequacy ratio was negative 6.26 percent at 30 June against a regulatory minimum of 15 percent, and the State Bank of Pakistan has relaxed that requirement only until October 2027. Equity of Rs3.109 billion at the end of June looks like a recovery from a deficit of Rs397 million at the end of 2025, but first half profit explains only Rs1.5 billion of the Rs3.5 billion swing. The rest is the sponsor's Rs2 billion advance, which is not yet share capital. Accumulated losses are still Rs5.452 billion.

The prospectus forecasts risk weighted assets doubling from Rs17.06 billion at the end of 2025 to Rs34.01 billion at the end of 2026. At 15 percent, that needs Rs5.10 billion of regulatory capital. The forecast closing figure is Rs2.487 billion, including the IPO at the floor price and a full year of profit. The shortfall is Rs2.615 billion, the same gap the valuation section deducts. The prospectus forecasts a capital ratio of 7.31 percent at the end of 2026, still below the minimum, and 17.82 percent at the end of 2027. The second figure depends on profit holding at the first half pace and on the relaxation lasting until then.

What lets the plan work is the asset mix. Gold backed loans were Rs34.2 billion of the Rs38.2 billion loan book at the end of 2025, carry a risk weight of 20 percent against up to 100 percent for unsecured loans, and yield an indicative 38.3 percent. The State Bank has let the bank exceed its 35 percent cap on gold lending until November 2029. But spot gold was about $4,100 an ounce on 5 November, roughly 27 percent below its January peak near $5,600, according to Nukta. The prospectus names gold price risk and "relatively high" loan to value ratios but gives no ratio. In dollar terms, any loan written near the peak at more than 73 percent of the gold's value now exceeds its collateral. Funding adds risk: the top 100 depositors held 55.67 percent of deposits at the end of 2025, and borrowings rose from Rs3.67 billion to Rs7.67 billion in the first half.

Who gains and what decides it

Existing shareholders gain most. ABHI (Private) Limited and TPL Corp Limited, which hold 73.73 and 26.27 percent today, get a listed currency and fresh capital, and keep control. Public investors buy a bank whose profits are reported and whose capital ratio is still a forecast. Arif Habib, Topline Securities, Growth Securities and Dawood Equities have underwritten the public portion and would take up unsubscribed shares at Rs15.50. Subscription opens on 12 November and closes on 13 November.