Privatisation: KSE issues first dividend in its history

Step highlights progress in the process to demutualise the bourse.

KARACHI:

For the first time in its history, the board of directors of the Karachi Stock Exchange (KSE) has recommended a dividend for shareholders of the country’s premier bourse. In an announcement on Monday, the KSE said its board has recommended the payment of a final cash dividend at 1.25%, or Rs0.125 per share, for fiscal year 2012-13.

“This will go a long way in the strategic sell-off of the Karachi bourse,” Topline Securities CEO Mohammad Sohail said while speaking to The Express Tribune. “The process of selling the strategic stake of the KSE is in an advanced stage, and this dividend will help find a new buyer for the exchange,” said Sohail whose brokerage house is one of the 200 members that own the exchange’s initial share capital equally among themselves.



Owned by 200 members, the KSE was incorporated as the country’s first stock exchange in 1949. However, it became demutualised last year, ending its long-held status as a so-called exclusive club.

After conducting a revaluation of KSE’s assets and liabilities at the end of 2011, initial shareholders – also known as members of the exchange – were given slightly more than four million ordinary shares of Rs10 each equally.

Of these shares, 40% were transferred into the members’ Central Depository Company (CDC) accounts while the remaining 60% were deposited in a blocked account at the CDC.

At any time not later than two years from the date of demutualisation (August 27, 2012), the regulators will make available 40% out of the 60% blocked shares for purchase to a ‘strategic investor,’ who will then have management control. Any aspiring strategic investor eyeing a 40% stake in the KSE must be a stock exchange, depository company, derivatives exchange or clearing house of international repute.

The rest of the blocked shares – which amount to 20% of the total stake – will be offered to the general public through an offer for sale, making the KSE a publicly listed company.

According to Sohail, each broker will get close to Rs500,000 for fiscal year 2012-13, as the dividend announced amounts to Rs100.1 million in aggregate terms. The KSE earned a profit of Rs669.2 million in fiscal 2011-12, up 361.7% from the preceding fiscal year.

Sohail refused to share the amount of net profit that the country’s leading stock exchange made in the latest fiscal year, saying he was not authorised to speak on the matter. However, he hinted that the KSE’s profit in fiscal 2012-13 is not remarkably high.

“KSE announced a 1.25% cash dividend, which is Rs0.125 a share, despite the fact that its profitability is far lower than what it was before 2008,” Sohail said.

Published in The Express Tribune, September 17^th,  2013.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.