The Privatisation Commission (PC) board approved on Wednesday a base price of Rs205 per share, a discount of Rs8.92 or 4.2% over stock market price, for the offer of 5% government stake in Pakistan Petroleum Limited (PPL).
The base price determined in the board meeting, chaired by PC Chairman Mohammad Zubair, was higher than that recommended by a consortium of financial advisers, hired to oversee the transaction.
The advisers had estimated the base price at Rs195 per share, seeking a discount of Rs18.92 or 8.84%, according to a member of the PC board.
The consortium comprises Habib Bank Limited, Bank Alfalah, Arif Habib Limited, Foundation Securities and BMA Capital Management. On Wednesday, PPL’s shares were traded in the Karachi stock market at Rs213.92, higher by 2.34% from the previous day.
“The Rs205 per share base price is quite attractive and investors should feel comfortable while investing in PPL’s shares,” remarked Zubair while talking to The Express Tribune.
On the basis of this base price, the government will fetch a minimum Rs14.986 billion, giving a discount of Rs625 million. Some 90% of the discount will go to big strategic investors while the remaining 10% will be offered to general public.
The 4.2% discount is less than over 7% concession that the government offered while offloading its stake in United Bank Limited.
Later in the day, the Cabinet Committee on Privatisation (CCOP) also met and approved the base price of Rs205 per share. Federal Minister of Science and Technology Zahid Hamid chaired the meeting as Minister of Finance and Privatisation Ishaq Dar was out of the country.
The PC will offer 70.05 million shares to both strategic investors and general public today (Thursday) through a combination of book-building and open subscription and the process will end on Friday night.
According to a PC official, 63 million shares will be offered through book-building while seven million will be sold to general public.
After the end of book-building process, the PC board and CCOP would meet again on Saturday to approve the strike price, which was expected to be higher than the base price, officials said.
Owing to the small size of the offer, the government believes, domestic investors will purchase bulk of the shares.
This will be the second capital market transaction in two weeks after the PC successfully offloaded 19.8% shares in United Bank Limited, earning Rs38 billion.
The government is pushing ahead with its plan to float PPL shares in the capital market through the Secondary Public Offering at a time when the market is nervous after recent violent clashes between police and workers of the Pakistan Awami Tehreek.
Because of the changing market sentiments, some PC board members wanted to set a lower base price, officials said. After fixing the price at Rs205, the financial advisers would have to work aggressively in the next 48 hours to achieve desired objectives, they added.
Under the $6.7-billion loan programme, the government has committed to the International Monetary Fund that it will reduce its stake in state units and complete at least two dozen privatisation transactions in two to three years.
Of the state’s 78% shareholding in PPL including 7.4% shares held by employees, it has already given the go-ahead to offload 5% shares. In 2004, 15% of PPL’s shares were sold at Rs5.6 billion.
Published in The Express Tribune, June 26th, 2014.
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