Investment appetite: PPL share offer brings premium of Rs1 billion

Investors show trust as govt sells 5% stake for Rs15.3b.

Shahbaz Rana June 28, 2014


The federal government offloaded its 5% stake in Pakistan Petroleum Limited (PPL) at a premium, earning total revenue of Rs15.3 billion, as its strategy to push ahead with the offer despite a volatile political situation won both political and financial gains.

The Cabinet Committee on Privatisation on Saturday endorsed the strike price at Rs219 per share for the PPL share float, which was higher by Rs14 from the base price, said Mohammad Zubair, Chairman of Privatisation Commission while announcing the outcome of the second capital market offer in as many weeks.

Despite political rallies and violent clashes that happened in Lahore, Islamabad and Peshawar, the share sale was successfully completed that indicated the government was in full control of the events, said an upbeat Zubair, who has two successful transactions to his credit.

About a fortnight ago, the Privatisation Commission had sold 19.8% government stake in United Bank Limited for Rs38 billion.

He said the UBL and PPL share offers generated Rs53 billion at a time when the government was in need of cash to run its affairs.

Zubair stressed that it was for the first time in the country’s history that any capital market transaction ended with a premium that reflected investor confidence in the government’s economic policies.

The government had offered 70.06 million shares at a discount price of Rs205 per share, which was 4.2% lower than stock market’s price. It had anticipated proceeds of Rs14.3 billion.

Zubair said shares were sold at Rs219 per unit because of high demand, giving a premium of Rs1 billion above the floor price. On the basis of prevailing market price of Rs213.92, the government got a premium of Rs343 million.

PPL’s shares were offered to international and domestic institutional investors as well as High Net Worth Individuals (HNWI). According to Zubair, 24% of shares were bought by the individuals, indicating increasing confidence of people in government policies.

He said at the floor price of Rs205 per share, orders worth Rs29.33 billion were received for 143 million shares – the highest-ever offer against any capital market transaction.

At the strike price of Rs219, orders worth Rs16 billion were received for 73 million shares.

Zubair pointed out that there were two views about whether the Privatisation Commission should press ahead with the share sale in the backdrop of recent incidents in Lahore, Islamabad and Peshawar. “The PPL transaction was completed in a very difficult environment,” he remarked.

“Had the share float been postponed, it would have dented the image of the government and Pakistan,” said Zubair.

At a time when various political segments were holding rallies, a lot of positive things were also happening like the PPL transaction, he said, adding people should have trust in government’s abilities.

Zubair also announced an aggressive privatisation plan for the new fiscal year 2014-15, commencing Tuesday. In the second year of the PML-N government, both capital market transactions and strategic sales will be completed simultaneously. The main focus will be on privatising power distribution, generation and transmission companies.

According to Zubair, five top-class international consortia have applied in the wake of advertisements given for hiring financial advisers for the sale of 26% stake in Pakistan International Airlines to a strategic investor.

He said the financial advisers would also be hired on July 14 to oversee the privatisation of Faisalabad Electric Supply Company.

First strategic sale of Heavy Electric Complex will be carried out by September this year while Oil and Gas Development Company’s shares will also be sold in the London Stock Exchange by the end of the month.

Published in The Express Tribune, June 29th, 2014.

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maverick | 8 years ago | Reply Though start is good however the real test will come when they sell sick loss making units. Rs 53 billion is worth only 30 days of furnace bill. Unless power sector recoveries are improved any other initiative's success will not matter at the end.
usman786 | 8 years ago | Reply

use this money to pay back loan, not to pay for dogs etc

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