KARACHI, June 18: On June 7, the Privatization Commission offered 57.5 million shares in Pakistan International Airlines (PIA) for public subscription. That amounted to divestment of 10 per cent government equity in the airline.

The offer was made at Rs20, which was at 12 per cent discount to the airline's market price of the stock at the time at Rs22.10. The share has since dropped to Rs18.55, which means that IPO price of Rs20 has become costlier by about Rs1.50, relative to the market price.

Two days ago, it was announced that the PIA's offer had been over-subscribed. Against the total stock amounting to Rs1,150 million on offer, the airline was announced to have received Rs1,329 million from the public in subscription.

Normal procedure, where IPOs are oversubscribed, is to hold balloting to determine successful applicants. Many investors may have hoped and prayed that they would be unsuccessful at the balloting, but those hopes appear to have been unfulfilled.

The lead managers announced on Friday: "As mentioned in our previous correspondence dated June 16, 2004, the offer has been oversubscribed, and the Privatization Commission intends to accommodate all applicants, subject to the consent of Cabinet Committee on Privatization and the scrutiny of the respective applications by the balloters."

The applicants may now be hoping that their applications would be disqualified on scrutiny or that the Cabinet Committee on Privatisation would not give its consent for accommodating all applications and insist on balloting. But would that make business sense for the Privatization Commission, when it is getting more than it bargained for?

All investors who may have to pick up shares that they applied for in PIA, may, however, take heart and be comforted by the knowledge that the share in PIA has galvanised more than 120 per cent from its market value at Rs9.25, this time last year.

PIA had returned to profitability in 2001 and for the latest year ended December 31, 2003, the airline had posted 75 per cent increase in pretax profit to Rs3.7 billion, from a year ago earnings.

The airline still carries debris of accumulated losses on its balance sheet. But after several blank years, the directors finally agreed with the KSE to pay a nominal 5 per cent cash dividend for the year 2003.