Pak Suzuki Motor mulls delisting from PSX

Board will review majority shareholder’s intent to buy all outstanding shares

KARACHI:

In a setback to the under-developed Pakistan Stock Exchange (PSX), the leading Japanese car and motorcycle manufacturing firm, Pak Suzuki Motor Company (PSMC), has announced that it is considering delisting from the bourse.

In a notification to the PSX on Thursday, the company said its board of directors was scheduled to meet on October 19, 2023 to “review and consider the majority shareholder’s intent to purchase all outstanding shares of Pak Suzuki Motor Company held by other shareholders and de-listing ... The decision taken by the board shall be communicated right after the meeting.”

The announcement quickly prompted brokerage and research houses as well as shareholders to come up with estimates as to what price the company would offer to buy back the shares from general public.

They estimated that the company could offer the buyback price in the range of Rs123-223 per share by applying different methods like the average price of the last five days or the last three-year average price, according to AHL Research and Topline Research.

As soon as the announcement was made, PSMC’s share price jumped Rs9 per share. Later, the full-day gains were clipped to Rs7.44 (5.47%) and it closed at Rs143.44 per share at the PSX.

The company did not communicate the actual reasons, but market speculation suggested that the listing was not giving any additional benefit to the company like tax incentives compared to the unlisted companies. Pak-Kuwait Investment Company Head of Research Samiullah Tariq recalled that there was a time when the corporate tax was low for the listed companies compared to the unlisted ones. “This difference has now reduced to next to nil.”

Secondly, the delisting will reduce regulatory cost for the company and it will no more be required to make material disclosures to shareholders. This is a good time for the company to get delisted considering its share price, like other listed companies, remains low in the wake of a fall in car production and demand.

The delisting will allow the company to keep all important updates to itself at a time when the auto industry is passing through tough times like thin demand for cars because of high inflation, exorbitant cost of car financing and economic slowdown in Pakistan.

The likely delisting is against the PSX’s ambition to bring more companies to the stock market and help them raise interest-free financing. In the past couple of years, many companies have put their decisions to get listed on hold as they are waiting for the right time and economic revival.

Another expert said Pak Suzuki had high potential to grow its revenue significantly with some changes in its management and business strategy. “But the lack of competition in its small car segments, excluding imported used cars, is giving no motivation to it.”

The company reported a net profit of Rs3.24 billion in the quarter ending June 30, 2023 compared to Rs443 million in the same period of last year. Cumulatively, in the first half of calendar year 2023, it booked a loss of Rs9.67 billion.

Published in The Express Tribune, October 13^th, 2023.

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