THE Pakistan State Oil Company is again in the news. The reports saying that its controlling shares will be sold to some strategic foreign buyers or a consortium of local investors through stock exchanges during the current year, has generated lot of speculative activity in its share for the last several weeks.

The debate in the market circles revolves around the question, “whether or not it is advisable to sell an oil marketing giant enjoying market shares of 70 per cent of the entire petroleum products as an earning corporate entity”.

Moreover, with the PSO’s strategic position from defence viewpoint in the backdrop of tense border situation, what its sell-off would mean if a war breaks out, stock market analysts ask.

The chairman of the Pivatization Commission (PC), who intends to complete the entire sell-off programme, which also includes the PTCL and some major banks by the end of the current fiscal, must have set up guidelines for prospective buyers to follow during the war.

But what will be the reaction of the new management if the government directs it to build up strategic reserves for a month or so in case war breaks out but the new management shows its inability on the ground of paucity of required funds, experts ask.

“ The Shell Pakistan and the Caltex may not be allowed to bid in an effort to discourage any possible energy supply cartel but what if their principal companies, having an enormous financial resources at their disposal may manage to manoeuvre the deal”, they said. How far they will be willing to oblige the government to sustain huge inventory losses as did the PSO during the Afghan war and Indian troop build up on the border.

Already one of them has cornered a substantial quantity of the floating stock of the PSO during the current speculative run and appears to be in a driving seat. The motive behind the massive investment may not be capital appreciation alone when the sell-off proceedings start.

The moping up operation may lay a solid basis for the prospective buyer and the stock-in-hand could be safely placed at the disposal of the consensus investor at the time of the bid. The high-ups entrusted with the job should take note of the pre-bid manoeuvring as it will play an important role in ascertaining the real value of the oil giant.

There is no denying the fact that the half-yearly sales of the PSO have come down to Rs.63 billion (slightly above $1billion) from the last year’s comparable figure of Rs70 billion followed by inventory losses and fluctuating prices, both local and foreign , after the partial deregulation of the oil sector.

But no one could precisely predict if the sales in the second-half of the year would show a further decline. Most of the leading marketing companies including the Shell Pakistan, whose share value has declined from the peak level of Rs300 to below Rs200 per share of Rs 10 may not respond favourably to the changed scenario. Most of them, including the PSO, have come out from the teething troubles of switch-over to the free market economy from the protected price fixation mechanism and the second-half could be better, oil marketing sources predict confidently.

A group of Lahore-based investors is out to corner its floating stock for more than one reason including the attractive lower price at which it is available in the open market.

Despite a lower-than-market interim dividend at the rate of 30 per cent and a sharp decline of 66 per cent in its after-tax profit at Rs452 million, its share value is stable above Rs130 against its par value of Rs10.

The PC has drawn an ambitious programme for the sell-off some mega-companies including the PSO and the PTCL and has already successfully sold out remaining 14 per cent official stake in the Muslim Commercial Bank and some other banks including the First Women Bank and the Prudential Bank.

The sell-off of the Habib Bank and the United Bank is well in advance stage and some others may follow soon as the government is inclined to raise $3.5 billion to retire a part of the huge foreign debt of $30 billion.

The PC has on its sell-off list over a 100 and odd companies, which also include a number of “sick ones” but financial analysts say that earning units, including the PSO and the PTCL, which not only have a good dividend record and contribute large amounts in taxes to the national exchequer but also have strategic importance should not be privatized.