Government to go ahead with sale of SOEs despite political turmoil

By Kazim Alam

KARACHI: The government is determined to hold the strategic sale of loss-making state-owned enterprises (SOEs) despite escalating political turmoil, Privatisation Commission Chairman Mohammad Zubair said on Monday.

Speaking at a road show organised in connection with the offer for sale of government’s stake in Allied Bank Limited (ABL), Zubair said international banks and funds were eager to invest in Pakistan after the successful transactions of United Bank (UBL) and Pakistan Petroleum (PPL).

Referring to a meeting he held with Prime Minister Nawaz Sharif in mid-September, Zubair said the premier was committed to selling entities like Pakistan Steel and Pakistan International Airlines in spite of mounting opposition from anti-privatisation lobbies.

“We can’t even transfer employees in these organisations,” he said while referring to the government’s helplessness in dealing with vested interests in SOEs. He added a turnaround under government ownership was impossible in entities like PIA and Pakistan Steel.

Referring to the reconstruction of ABL’s capital in 2004 whereby the Ibrahim Group took over the bank’s control, Zubair said its privatisation had benefitted its employees, banking sector and consumers of banking services alike.

The government is offering its residual shareholding of approximately 11.5% in ABL through privatisation. The offer for sale of shares consists of 131.2 million ordinary shares, which will be extended to high net worth individuals and institutional investors through a book-building process on December 10-11.

The floor price, which is the lowest price any eligible investor can bid at, is going to be at a premium to the par value of Rs10 per share and will be notified on Tuesday.

However, the strike price will be calculated through the Dutch Auction Method, which will determine the maximum price at which all shares that are up for grabs are fully subscribed.

Unlike past transactions that allowed the minimum bid amount of Rs1 million, it will be Rs500,000 for ABL’s shares. This is being done to attract more retail investors, according to Elixir Securities Head of Corporate Finance Babur Rais.

Rais said the post-transaction free-float of ABL would increase to approximately 20% from 9%. Currently, 63.4% shares of the bank are held by its directors. Ibrahim Fibres, which is owned by the majority shareholders of ABL, owns another 16.9% stake.

The State Bank of Pakistan (SBP) and the federal government own shareholdings of 10% and 1.4%, respectively. This represents the offer for the present sale of shares in ABL.

The share price of ABL stood at Rs116.53 at the end of trading on Monday after increasing by Rs1.58. The transaction is going to be worth around Rs13.1 billion at current prices, according to Topline Securities.

ABL is one of the top five banks in terms of market capitalisation, loans and deposits. Its net profit for the first nine months of 2014 was Rs11.5 billion, which makes it the fifth most profitable bank operating in Pakistan.

Its non-performing loans (NPLs) ratio at the end of the third quarter of 2014 was 7.7% as opposed to 13% for the entire banking sector.

Topline Securities said with four new public offerings in December, the number of total public offerings during the current year will reach 10 as opposed to only three in 2013.

“This number is good compared to the last five-year average annual offerings of around three. But it is still less than (the average of) 30 offerings a year in the 1990s,” it said.

Published in The Express Tribune, December 9,  2014.

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