Investment opportunity: PC approves further share-selling of state-owned units

Five lucrative companies selected for off-loading shares.


Shahbaz Rana January 09, 2014
The Board had already approved the privatisation of Pakistan International Airlines, National Power Construction Company and Heavy Electric Complex. PHOTO: FILE

ISLAMABAD:


The Board of Privatisation Commission (PC) approved on Thursday to sell significant number of shares owned by the state in two energy sector companies and three commercial banks aimed at raising at least Rs200 billion to pay off the country’s mounting debt.


The Board that met under Privatisation Commission Chairman Mohammad Zubair Umar approved divestment of shares in Habib Bank Limited (HBL), United Bank Limited (UBL), Allied Bank Limited (ABL), Oil and Gas Development Companies Limited (OGDCL) and Pakistan Petroleum Limited (PPL).

The Board had already approved the privatisation of Pakistan International Airlines (PIA), National Power Construction Company (NPCC) and Heavy Electric Complex (HEC).

The Board also allowed the Commission to initiate the process of hiring financial advisors for off-loading shares of these five entities in the domestic and international markets, and constituting Transactions Committees (TCs).

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All these companies are considered ‘blue-chip’ and are performing well in the Karachi Stock Exchange. On the basis of present value of their shares, the government has estimated a minimum of Rs175 billion in receipts. However, officially, the PC Board has neither announced the number of shares that will be off-loaded, nor the anticipated price tags.

Since 1991, significant number of shares of all these entities have been sold in the stock markets and the government earned Rs150.3 billion from these five entities in the past, showed the Privatisation Commission documents.

“Let the financial advisor study the market and suggest the number of shares that should be off-loaded”, said PC Chairman Mohammad Zubair while talking to The Express Tribune. He said both the options of going to the international market for issuance of Global Depository Receipts and floating shares in the domestic market were on the cards.

Zubair said the PC Board internally discussed and approved the number of shares of the each company that will be off-loaded. The government will ensure transparency in the process of privatisation and all stakeholders would be taken into confidence, he added.

Under an ambitious privatisation plan agreed with the IMF, the government has announced to privatise 32 entities in what it said is an attempt to reduce losses and retire the country’s total public debt that has crossed the threshold of Rs15 trillion. The capital market transactions are purely meant to retire public debt.

Another PC official did manage to give an idea of the decisions taken by the Board. According to him:

OGDCL

The PC Board approved to sell up to 10% shares of OGDCL out of total 85% shares held by the government. The minimum expected earning is estimated at Rs80 billion, according to officials privy to the discussions. From 2003 to 2007, the Musharraf government sold 15% shares in domestic and international markets in three transactions and earned Rs56.25 billion.

PPL

Out of government shareholding of 78%, the PC Board decided to off load 5% shares. The anticipated earning is Rs20 billion. In 2004, the government sold 15% of PPL shares of at Rs5.6 billion.

HBL

The PC Board decided to sell up to 20% shares of HBL out of total state owned shares of 42%. The expected minimum return is Rs50 billion. From 2003 to 2007, the Musharraf government sold 58.5% shares at Rs34.6 billion in two transactions.

ABL

The PC Board decided to sell the remaining 10% government shares in ABL. The anticipated minimum income is Rs10 billion. In 1991, the PML-N government had sold 51% shares of ABL at Rs971.6 million.

UBL

The Board also decided to sell 10% government shareholding in the UBL out of the remaining 20%. It has expected that minimum Rs15 billion will be raised from the process. Since 1996, the previous governments sold 80.2% state shares in three transactions and earned Rs52.8 billion.

The PC chairman said that the market appetite and availability of capital will be key determinants for off loading the numbers of shares, as the government will not sell shares over and above the market needs in order to get best possible price.

Published in The Express Tribune, January 10th, 2014.

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