KARACHI, April 5: The Privatization Commission is expected to raise a total of over Rs15 billion through divestments in government held equity, during the current financial year.
It has already been able to raise over Rs9 billion from divestments in National Bank of Pakistan (NBP); Oil & Gas Development Company Limited (OGDCL) and Sui Southern Gas Company Limited (SSGC). Aside from the divestments, the strategic sale of 51 per cent shares in Habib Bank Limited has also resulted in inflow of Rs11 billion in the current financial year.
Murad Ansari, analyst at KASB Securities believes that the ongoing financial year has been a good year so far for the Privatization Commission. "Two more public offerings have been planned for the current financial year, which would increase the total sum of money raised through divestments alone to over Rs15 billion" says he.
The two public offerings that are likely to come through during the current financial year are: (i) Pakistan International Airlines (PIA) which may be offered towards the end of April, and (ii) Pakistan Petroleum Limited (PPL) which is looked forward to come up with its Initial Public Offering (IPO) towards the end of May.
Kot Adu Power Company Limited has also been added to the divestment list of Privatization Commission, but the transaction is expected to materialize by the end of current calendar year.
The liquidity at the market is strong and a lot of money is chasing few shares, which is why small investors have been lucky to make fortune out of their investment, particularly in the OGDC's IPO.
As the market has lot of appetite for new stocks, the analyst believes that the offerings now in the pipeline, would receive good investor response, when they enter the capital market.
The divestment in three companies during the current financial year included: 3rd Tranche in National Bank of Pakistan of which 13 million shares were offered to raise Rs604 million.
This was followed by the 215 million shares IPO of OGDC which came up in November 2003. The IPO asked for subscription of the value of Rs6.9 million at Rs32 per share - the biggest ever public offering in the Pakistan capital markets. SSGC offering of 68 million shares to raise Rs1.8 billion came in February 2004.
Analysts believe that since the sale of strategic stakes generally require a longer period of time, the Privatization Commission is focussing on raising funds for the government through divestments. That is thought to be a prudent approach as divestments not only increases the depth of stock market through increased free float, but new listings increases the investment options at the KSE.
The divestments in the pipeline for the current year are those of PIA, PPL and possibly Kot Adu. The government plans to divest a total of 10 per cent of its holdings in PIA, which would be about 52 million shares. As in the case of SSGC, the stock is likely to be offered at a 10-15 per cent discount to the market price. The PC is aiming for end-April for this transaction.
But the IPO that the market is intently looking forward to is that of Pakistan Petroleum Limited (PPL). This is yet another upstream oil and gas company to be listed on the KSE.
The PC aims to divest a total of 64 million shares of PPL through a public offering. The issue would probably be based on valuation multiples. But most of the market is looking at the PPL share offer to be in the price range of Rs45 to Rs55 per share.
