Ex-Pack IPO mired in controversy amid industry allegations

• Corrugated carton industry disputes market leadership claims in IPO prospectus
• Asks CSE to delay IPO until such information rectified in IPO prospectus
• Issue managers certify information in prospectus; say allegations fuelled by personal issues 

By Nishel Fernando 
Lanka Corrugated Carton Manufacturers Association (LCCMA) has requested the Colombo Stock Exchange (CSE) to delay the upcoming initial public offering (IPO) of Ex-Pack Corrugated Cartons (Pvt) Ltd until the company rectifies the alleged inaccurate information regarding its market share provided in the IPO prospectus. 

However, the company denied these allegations saying that such allegations were purely fuelled by personal issues between Ex-Pack and some of its competitors. 

“From the start of the IPO process, certain competitors have been circulating malicious messages questioning all of Ex-Pack’s financial and other information including the reasons for the IPO. This is due to personal issues the competitors have had with Ex-Pack and pure jealousy,” Asia Securities, one of the joint mangers to the issue, stated in memo to stockbrokers.

The CSE early this month approved Ex-Pack’s Rs.700 million IPO offering 25 percent stake in the company to fund its production expansion plans. Accordingly, the company released the issue prospectus on 6th of this month and the IPO is scheduled for the 22nd.

Based on its internal management estimates on the production volumes of competitors, Ex-Pack claimed the market leadership in the corrugated cartons industry with close to a market share of 18.3 percent in 2021, according to the prospectus.

Issuing a letter to the CSE last Saturday, LCCMA disputed Ex-Pack’s market leadership while alleging the firm violated CSE’s declaration listing rule. 

“The company is not in fact the market leader, but only one of the larger corrugated companies in the industry… We strongly believe that the statements mentioned above alluding the company being the undisputed market leader, with a market share of 18.3 percent and producing one in five corrugated boxes in Sri Lanka is the material information in the context of the issue. Hence, its a serious violation of the accurate declaration expected from the directors and managers to the issue as it’s completely false and therefore misleading the public and the investors at large,” LCCMA said.

The Association requested the CSE to intervene to correct and re-circulate the ‘corrected prospectus’ and information memorandum to the public representing ‘true’ facts and figures relevant to the market share and sales volumes vis-a-vis as an erratum. Further, it asked the CSE to delay the proposed issuance until a requisite rectification is made to the prospectus.

However, Asia Securities in its memo to brokers stressed Ex-Pack’s claim on the country’s corrugated market leadership is based on sound  facts and data and points out that in the absence of a third  party firm that it does research market share data for the industry.

“We would like to highlight that there is no change to the fundamentals of Ex-Pack’s business and its forecasted revenues, profitability, and valuations,” Asia Securities stated. 

Meanwhile, the other joint manager to the issuance, Capital Alliance (CAL) noted that a formal response would be shortly submitted to the CSE addressing key matters raised by LCCMA.

“The company will make a formal response to the CSE and that will address any issue that might have been brought up,” CAL’s Global Markets & Investment Banking- Managing Director, Deshan Pushparajah told Mirror Business. 

Further, he was confident that the IPO would move ahead as scheduled on 22nd of this month.