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Philippine firms delaying IPOs turn to PEs for funding as outlook for PSE debut in 2024 remains bleak

  • High debt levels, interest rates push local companies to seek PE funding
  • Capital raised from IPOs in 9M23 plunges almost 77% YoY 

Companies poised to launch their initial public offerings (IPO) on the Philippine Stock Exchange (PSE) this year or early next are now in talks with investors, including private equity firms, for possible fundraising as their debuts on the local bourse face further delays, advisors and industry executives told Mergermarket.

Local conglomerate Metro Pacific Investments [PSE:MPIC] is mulling a private placement to prospective investors for Metro Pacific Tollways (MPTC) and Maynilad Water Services ahead of their IPOs given weak market conditions, this news service reported earlier this month.

The PSE Index is currently down 6% YTD.

Both companies must augment their funding requirements and the timetable remains fluid as any capital raise would depend on how the economy would fare in 2024. “We have to be cognizant of tough market conditions. It’s a tough world out there with all these things happening,” Metro Pacific Chairman Manuel Pangilinan said, alluding to the mounting geopolitical tensions that threaten the stability of global supply chains and oil prices. The Philippines is a net importer of oil, hence, the price of which has a huge effect on the country’s consumer price index (CPI).

Metro Pacific has always been vocal that it is receptive to holding talks with private equity investors for its subsidiaries, as Mergermarket has been reporting since the IPO of its water, tollways, and hospitals subsidiaries was floated three to four years ago.

According to this news service’s IPOs Gone Cold: South East Asia Edition in March, the Philippines’ IPO market remains in hibernation. Since then, only three firms have debuted on the PSE in 2023: Repower Energy Development Corp [PSE:REDC], Upson International Corp [PSE:UPSON], and Alternergy Holdings Corp [PSE:ALTER].

Bankers and industry executives said the local equities market is still unfavorable for any IPO on the PSE as interest rates and inflation remain elevated. The Bangko Sentral ng Pilipinas (BSP), or the Philippine central bank, maintains a hawkish stance by keeping policy rates on hold at 6.25% in September in case economic conditions worsen. Meanwhile, the Philippine Statistics Authority reported earlier this month that headline inflation eased to 4.9% in October from 6.1% in September, when the price of rice hit a double-digit increase.

Debt, interest rates

Advisors said that even though the IPO market has slowed down, they still have work as M&A remains active, especially now that local firms are turning to private capital for their funding needs.

“A lot of companies took excessive debt when interest rates were low. Banks were happy to lend. The problem is when interest rates rise, equity valuations drop so it’s not a great time to raise equity. However, some companies may not have a choice,” a sector advisor said.

Some companies have already reached the maximum debt level they could take so they have no choice but to take the PE route. An alternative is to get acquired by someone bigger. “However, you need to have a solid execution of your business plan because you can’t make a small mistake—PEs are unforgiving in that regard,” a first source familiar with the situation said.

There is interest from PEs, but they are looking at hot sectors like renewable energy and infrastructure companies like Aboitiz Equity Ventures [PSE:AEV], which has a listed power and unlisted infrastructure units, and Prime Infrastructure Capital to come into select projects or into the company itself as an entry point, the first source continued.

A second source familiar with the situation said Prime Infra’s PHP 28bn (USD 500m) IPO has been called off.

PSE Chief Operating Officer Roel Refran said in a virtual investor forum today (15 November) that the local bourse may only reach 70% of its PHP 200bn target for capital raised, as big offerings were derailed, including that of Prime Infrastructure, which had to “course correct” its IPO plan.

Prime Infra said in a statement the IPO was still on hold and would happen at the right time based on capital needs and market conditions.

ORCA Cold Chain Solutions, which was gearing up for a PHP 1.5bn IPO (USD 26.7m) in 2022, may sell a stake to PEs, as well as strategics as an alternative to raising capital in the public market,” the same source familiar with the situation said. ORCA is a subsidiary of ISOC Holdings, a local investment holding company owned by the Cosiquien family.

ISOC Holdings Chairman Michael Cosiquien told Mergermarket that it is not pursuing an IPO for now and ORCA is receptive to partnerships “through investments or technical partnerships.”

North Star Meat Merchants, one of the largest pork and beef vendors in the Philippines, is in investment talks with PEs in lieu of an IPO, the first source said, pointing to the previous reports that it has been seeking foreign PE and strategic investors. It has deferred a PHP 4.5bn (USD 80.4m) IPO because of inflationary pressures and market volatility.

While financing via PEs is feasible, the Philippine market “is not yet mature for them yet,” compared to Vietnam, which has dozens of PE deals every month, a third source familiar with the situation said. The main reason is the owners’ unwillingness to be diluted and loss of complete control—issues for PE investment and public listing. “PEs require companies to list so they can exit. We need a successful exit story, which we haven’t had any,” this source noted.


Real estate investment trust (REIT) listing and preferred share issuances have better prospects in 2024, the first source said. Both investment vehicles have hybrid equity and fixed-income characteristics, which are more desirable to investors in these uncertain times.

In the pipeline are the REITs of Cosco Capital and SM Prime Holdings [PSE:SMPH]. Mergermarket reported in August that Cosco Capital was still weighing the REIT IPO, which was supposed to be this year’s biggest at PHP 30bn (USD 536m), as announced by PSE President Ramon Monzon.

SM Prime has also deferred its REIT IPO. It hired UBSJP MorganChina Bank Capital, and BDO Capital to lead its USD 1bn REIT listing which was supposedly slated for 2H23, Mergermarket reported in June.

According to PSE’s Refran, the PSE’s revenues from IPOs as of 9M23 fell 29.4% YoY to PHP 241.8m, while revenues from listing maintenance dropped by 1.8% YoY to PHP 196.7m. As a result, PSE revenue from listing-related activities declined by 19.2% YoY to PHP 434.47m.

The number of IPOs in 9M23 dropped to three from eight in 9M22, causing a fall of 76.6% to PHP 4.32bn in capital raised from IPOs YoY. Average capital raised per IPO was only PHP 1.44bn in 9M23, a drop of 38% from a year ago, he said.

During the 9M23, the total value turnover has dwindled to PHP 1.21bn from PHP 2.23bn and PHP 1.79bn, in full-year 2021 and 2022, respectively. Foreign trading remained constant at around 43% in 9M23 YoY, he added.