IPO ... Eversendai Corp Bhd

Eversendai Corp Bhd, a steel contractor and fabricator en-route to a listing on Bursa Malaysia.

The company, which has lodged a draft initial public offering (IPO) prospectus with the Securities Commission, earns 95% of its revenues from overseas, namely Dubai, Abu Dhabi, Qatar, India, as well as other countries in the Middle East. Eversendai was a well-established brand in markets like the United Arab Emirates (UAE) and Qatar.

For the financial year ended Dec 31, 2010, Eversendai’s revenue from principal markets in the UAE and Qatar was RM569.03mil, representing 76.39% of total revenue of RM744.93mil.

Eversendai plans to utilise RM83mil of the proceeds raised for its operations in India. RM50mil would be for the acquisition or establishment of a fabrication facility in India with a capacity of 36,000 tonnes per annum. Eversendai planned to invest another RM33mil to increase the capacity of its Indian plant to 50,000 tonnes a year.

The facility, to be set up within two years of its IPO, will be located in Tamil Nadu or Andhra Pradesh.

The company did not reveal how much it is planning to raise from the IPO exercise, but was allocating RM126mil for capital expenditure.

The IPO is expected to involve the public issue of 160.7 million new ordinary shares of 50 sen each which will be allocated to selected and institutional investors. There is also an offer for sale of 71.49 million ordinary shares, of which 20 million will be allocated to the public.

It is disclosed that while the company may only own 49% of its businesses in the Middle East, the distribution of profits will differ from the shareholding structure.

Eversendai has a 49% stake in both its UAE units — EV Abu Dhabi and EV Dubai. It also commands 49% in Qatar-based unit, EV Qatar. Ownership law in the UAE allowed profits to be distributed on a basis which differs from the shareholders’ percentage holding of shares if set out in the memorandum of association.

There is no law or regulation which sets a cap on what percentage split is acceptable ... the memorandum of association may allocate profits to shareholders in a different percentage to their shareholding. It is a commonly established principle that the maximum allowable profit split is 90/10 in favour of the non-national partner in Abu Dhabi (in very limited circumstances) and 80/20 in Dubai. Meanwhile, Eversendai was entitled to 70% of EV Qatar’s profits and losses.

Eversendai got its first break in the Middle East more than a decade ago when it was awarded structural steel work for the renowned Burj Al Arab hotel project. In Malaysia, Eversendai was involved in the construction of landmarks such as Petronas Tower 2, Suria KLCC, KL Tower, Menara TM and KL International Airport.

The group also had secured structural steel packages for six landmark towers in Qatar, Abu Dhabi and Dubai totalling about 550mil dirham (RM490mil).