OGDCL shares: Investor appetite will not be affected, say analysts
The book-building process to be held for the secondary public offering of Oil and Gas Development Company Limited’s (OGDCL) shares will begin sometime next week as the Supreme Court of Pakistan has allowed the transaction to go ahead, officials said on Friday.
“Even though we have been allowed to proceed, the process can only start after October 13 (Monday) when the court has asked all parties to show up so that the matter could be settled,” said an official involved in the deal.
OGDCL’s book building, which helps the share underwriters to determine market appetite for the securities, was supposed to take place between October 9 and 15.
But that did not happen after the Pakistan Tehreek-e-Insaf-led government of Khyber-Pakhtunkhwa asked the Peshawar High Court to stop the sale of the government’s 10% stake in the company.
The government hopes to raise around $800 million from selling 322 million shares or 7.5% of the paid-up capital in the country’s largest petroleum firm to local and international investors.
Despite the delay, fund managers and analysts say that smart investors will not be giving much weight to political issues when it comes to determining the worth of OGDCL.
“The [court] case has no impact on the company at all,” said Nihal Cassim, CEO at Safeway Fund. “As far as international investors are concerned, they are smarter to realise the real worth of this company.”
OGDCL posted a net profit of Rs123.914 billion in fiscal 2014, up 35.77% over the previous year. It boasts total assets of Rs496 billion and contributes 29% and 50% to Pakistan’s gas and oil production, respectively.
Saad Khan of Arif Habib Limited said that he also sees the transaction going through without major hindrance. “I don’t see political concerns weighing down book building. Rather, it would be the oil prices that might affect valuation of shares.”
KASB Securities is the lead manager for secondary public offering in local capital markets while Bank of America Merrill Lynch and Citigroup will handle sale of global depository shares.
Previously, the government sold OGDCL shares to foreign investors in November 2006. It raised $772 million against the sale of 408.6 million shares.
Senior company officials along with Privatisation Commission Chairman Mohammad Zubair are already on a tour for road shows in a bid to woo foreign investors.
Speaking to potential investors last month in Karachi, Zubair had said that selling shares was not easy especially since such a large transaction was taking place after eight years.
More importantly, he said, this will help improve the country’s image, raising the stakes for the transaction after which the government is to sell stake in strategic assets like Pakistan International Airlines (PIA) as well.
Around 90% of the proceeds from the OGDCL sale will go towards debt servicing with the remaining amount to be used for programmes related to poverty alleviation.
OGDCL plans to spend Rs105 billion in the ongoing fiscal year with nearly half of it earmarked for drilling over 30 wells.
Published in The Express Tribune, October 11th, 2014.
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Can the reporter on this article make the following correction i.e. KASB Bank is the Domestic Lead Manager of this transaction.
I thought the point of this entire privatization exercise was to reduce the strain on our national exchequer due to entities such as PIA and PSM. So far the government has only sold its stakes in the profitable organizations and made millions of dollars.
Why do I feel that this government will complete its tenure and still be in the planning phase for the privatization of the "strategic" assets (the actual reason why privatization is happening in the first place)?
Asim, they are not "privatizing" their oil and gas assets. They are merely selling a 10% stake. Government will still retain almost 65% of the company, operationally and strategically nothing will change (which is unfortunate because the current management is completely idiotic).
it is only divestment of shares by the government no not privatization (transfer of control and management). Even after completion of this transaction, the government will retain over 70% stake in the company.
(I had written this email to engro power and cc to secp and sbp for necessary action)
Mr Ather
Congratulations on overwhelming response of general public in the IPO of EPQL, it shows the level of trust on ECORP. As discussed over phone little while ago, I would like to inform that if the shares applied for are in excess of the shares offered, the distribution shall be made by computer balloting, however as per FAMCO notice pubished on KSE website at 21:14 claims to apply proration formula which the clear violation section 2.8 (f) (v) on page 12, 13 and 14 and it also supersedes the prior notice published on KSE at 17:06 on 02-10-14. I would also like to draw the attention of secp and sbp to this serious concern.
Regards
Muhammad Asad Khan 03452296992
No country in the world has privatized its oil and gas assets; Its extreme hunger of rulers; Those Judges that allow sale of OGDCL are involved with them.