Troubled oil marketing company, Hascol Petroleum, has granted permission to potential strategic investor Taj Gasoline to conduct due diligence for the acquisition of a 41% stake with management control through injected fresh equity.
If the deal is deemed viable, Taj Gasoline may acquire additional shares from the general public at the Pakistan Stock Exchange (PSX), potentially increasing the total shareholding to more than 41%. The specific amount of stakes to be additionally purchased from retail investors remains undecided at this stage.
Taj Gasoline currently operates 75 retail outlets, with 61 of them located in Sindh, as stated on their official website. In the year 2023, the company obtained a second marketing license for the province of Punjab. Taj Gasoline also boasts a storage capacity of 13,000 metric tonnes in Shikarpur, Sindh, and has plans to establish additional facilities throughout the country.
In a notification sent to the PSX on Friday, Hascol Petroleum’s Company Secretary, Farhan Ahmad, stated that the board of directors had reviewed the terms of the “non-binding offer received from the potential investor and resolved to authorise the management to permit the potential investor to carry out due diligence of the company and its business/operations.”
He clarified that the potential investor’s proposal involves injecting new equity into the company through the subscription of new shares, and the existing sponsor shareholders have no intention of selling their shareholding.
Earlier, AKD Securities – the lead manager of the offer – reported to PSX that it, on behalf of the acquirer, has submitted a public announcement of intention to acquire at least 41% of the issued and paid-up share capital and “control of Hascol Petroleum Limited.”
Hascol Petroleum has faced financial challenges since 2017, exacerbated by allegations of financial discrepancies and fraud involving its top management and banks. The company’s latest quarterly financial report for the nine-month period ended September 30, 2022, highlighted liquidity constraints due to limited working capital availability, impacting overall sales volume.
One of the main challenges for the company is the interest cost and financial charges associated with overdue loans and the unavailability of working capital banking facilities. Hascol is currently negotiating with banks to agree on a debt restructuring plan and has filed a scheme of arrangement in the Sindh High Court, with the first creditors’ meeting expected to take place under the court process.
In this context, the potential investment offered by Taj Gasoline represents a lifeline for the troubled company. The injection of new equity would help restore confidence among creditors and facilitate the debt restructuring process under consideration.
Considering Hascol’s current share price of Rs5.84 at the PSX, the market value of the company stands at approximately Rs5.83 billion. However, the share price does not accurately reflect the actual value of the company, given the continued selling pressure on the stock exchange amid political and economic turmoil.
For the nine-month period ending September 30, 2022, Hascol reported a net loss of Rs9.55 billion (loss per share of Rs9.56) compared to Rs4.30 billion (loss per share of Rs4.31) in the corresponding period.
The board has also authorised representatives to facilitate the due diligence process, appoint advisors and consultants, negotiate with potential investors, and prepare the necessary documentation. “Upon finalisation of the terms of the potential arrangement by the management, the same shall be presented to the board of directors for their consideration and approval,” said the notification.
Published in The Express Tribune, June 18th, 2023.
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