KARACHI, Dec 31: The Aga Khan Fund for Economic Development has offered a per share bid of hardly Rs30 for Pakistan's second largest bank Habib Bank on Monday.

But completion of a financial restructuring, now underway in Habib Bank, will push up per share bid price of Aga Khan Fund to Rs63.68. This financial restructuring or what is being described as equity rationalization means taking care of accumulated losses mainly because of bad loans portfolio.

Sources in Privatization Commission in Islamabad and in Habib Bank in Karachi said that as on June 30 this year the net worth of the bank was determined at Rs14.8 billion. There were about 1.2 billion shares of the bank.

A financial engineering of Habib Bank will take care of accumulated losses and will bring down the paid up capital to Rs6.9 billion after the Privatization Commission completes legal requirements through court, Securities and Exchange Commission of Pakistan and State Bank of Pakistan.

A downsizing of paid up capital will also reduce the number of shares to 690 million. For 51 per cent of these 690 million shares, that comes to 351.9 million shares Aga Khan Fund has offered Rs22.409 billion.

"We are offering a running bank that meets all the requirements of the regulators," remarked a source in the Privatization Commission who said that per share price of the bank was not the real reflection of bank's financial strength.

Sources in Habib Bank expect transfer of management in next 45 days after the SECP and State Bank scrutinise the Aga Khan Fund's nominated management team.

The government injected Rs17.7bn in the equity of Habib Bank as it was found to have a big hole of Rs27bn. The current financial restructuring is expected to take care of the left over losses.

The sources indicated that new management would have to invest about Rs4 billion in staff restructuring even after more than 11,000 employees were relieved under a golden hand shake scheme.

Privatization of the HBL on Monday did not create desired impact on the stock market. Described as 'landmark privatization' by Dr Hafeez Sheikh, the successful bidding of HBL on Monday failed to motivate the investors. On Tuesday the Karachi Stock Market showed a negative four point and did not show much improvement on Wednesday.

A prompt notice by a Jamat-e-Islami Senator Khurshid Ahmad to discuss privatization of HBL in parliament has apparently dampened the spirits of the investors and stock market is abuzz with all sort of speculations. Also worth taking notice are the comments offered by ruling party senators on this deal.

Privatization of banks in Pakistan were never controversy free. The first bank offered to investors was Muslim Commercial Bank in 1991. Abdul Kadir Tawakkal offered the highest bid at Rs 56 a share.

He was denied MCB takeover and instead a National Group of a dozen investors were offered to raise their bid price. Tawakkal is now in prison facing a number of charges. The leader of National Group Hussain Lawai is not in Pakistan.

Allied Bank was the second bank given to employees and management of the bank through a negotiated price of Rs 87 a share in 1991. Its two presidents went to jail and the third remain under investigation. The ABL is now again on the auction bloc under State Bank supervision.

United Bank was given to a Middle Eastern investor last year after a lot of controversy and heat that generated after bidding. There were last minute efforts to put a spanner in the HBL privatization. A proposal was offered to merge HBL with NBP.

This proposal is impractical because merger of two giants HBL and NBP would be to bring 40 percent of Pakistan's banking under a single entity. It would invoke provisions of Monopoly Control Authority.

Secondly this merger would lead to closure of more than 1,000 branches of either of the two banks and would cause massive unemployment. Thirdly, it would have deprived public a choice for banking services.