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February 28, 2017

Volume 7 Issue 4

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Hi-Tech Banks IPO Funds on Fuels

In the year since its January 2016 initial public offering, Pakistan’s Hi-Tech Lubricants Ltd. has invested around 1.2 billion rupees (U.S. $11.4 million) of the funds it raised, mostly on its foray into the fuel retail and service center businesses, which it said will be a boon to its lubricants sales.

“To increase infiltration into the market, we are venturing into the [fuel marketing] business,” CEO Hassan Tahir told Lube Report Asia. “With licenses already received, we have plans to open 300 fuel stations nationwide by the end of 2020.”

Hi-Tech expects fuels to make up around 45 percent of its total revenue within a year after its first sale, which it forecasts to occur in the last quarter of 2017 or first quarter of 2018. By its fourth year of operations, Hi-Tech said revenue from its fuels sales alone could be up to 250 percent higher than its current income. Hi-Tech will market mostly motor spirit and high-speed diesel products.

Fuel retail will help Hi-Tech grow its lubricant brand presence as well, Tahir noted.

Around 40 percent of the new stations – consisting mostly of locations in urban areas or near highways – will also have HTL-Express lubricant service centers, Tahir added. HTL-Express centers offer oil changes along with a number of other routine maintenance services.

Hi-Tech, which distributes Zic branded products for South Korea's SK Lubricants, has already used IPO funds to purchase land for a service center in Lahore, where it is based, and has rented 4 service centers in Lahore and two in Karachi.

HTL-Express centers in Lahore will be opened by the end of the first quarter, while locations in Karachi and Islamabad are currently under development and will launch soon, Tahir said, noting that the stations will offer a wide range of franchise options.

Pakistan’s automotive market, which is expanding both through an increase in local manufacturing and imports, is spurring an increase in lubricants demand, Tahir said. The industrial segment also offers high growth potential for the company. 

Photo: Hi-Tech Lubricants Ltd.

Hi-Tech is upgrading its blending plant in Lahore, Pakistan, using its own funds rather than what it raised in its 2016 initial public offering.

In response to demand, Hi-Tech is currently upgrading its blending plant, which it inaugurated in August, but is not doing so with IPO funds. It recently installed an additional drum-filling line and is negotiating contracts for additional 20-liter pail filing lines. By the end of 2016, the plant had already produced around 4,400 metric tons of finished lubes.

Hi-Tech raised 2.84 billion rupees in the first week of January 2016 in what was then supposed to be the first phase of its IPO on the Pakistan Stock Exchange. The company raised more than 2 times the amount it aimed for, and has since decided not to conduct a second round.