KARACHI, Oct 16: In an “unconventional auction” of the investment portfolio of the Investment Corporation of Pakistan (ICP) on October 10, shares of 277 companies were sold off at less than one-third of the current market price and substantially less than half of the original investment cost.
According to ICP sources, the auction realised Rs55 million for an investment portfolio that is being quoted now in market at Rs163 million. Its original cost is Rs132 million. Overall an investment portfolio of more than Rs2 billion of the ICP has been disposed of in a manner that raises many questions in the market.
No public notice was issued. No bids were invited for the auction of ICP’s investment portfolio which is said to be a step towards its merger with Industrial Development Bank of Pakistan (IDBP).
The IDBP, it may be recalled has already been found insolvent that carries an accumulated loss of Rs27 billion. The prime minister has formed a three ministers committee headed by Federal Law Minister Wasi Zafar to investigate into causes of IDBP’s losses and insolvency. Media reports suggest that the State Bank of Pakistan wants investigation by the FIA or NAB to fix responsibility on the persons for this scam.
“The ICP’s assets have been disposed of in an indecent haste as was the case with privatisation of Pakistan Steel,” argued a market analyst who questions the decision to wind up ICP because it fulfils all the ratios set for a going concern.
The auction is unconventional because the decision to sell off ICP’s investment portfolio was taken by the shareholders who were on the board of the ICP. The beneficiaries of this auction are also its own shareholders — nationalised and privatised banks and public sector and private insurance companies — who shared among themselves the shares worth more than Rs2 billion by way of distribution of certain category of shares in proportion of their stakes in ICP and by auction.
With 22.99 per cent shareholding in the ICP, the privatised United Bank, according to the sources, is the biggest beneficiary as it got a lion’s share in the booty.
Mr Tariq Iqbal Khan of the National Investment Trust (NIT) is managing the affairs of the ICP with directors drawn from the privatised banks and National Bank of Pakistan. These directors on August 26 decided to distribute liquid shares of more than 100,000 per company in specie among the shareholders of the ICP in proportion of their shareholding.
The other shares were auctioned in which only the shareholders participated. The shareholders of the ICP in annual general meeting on September 23 endorsed this decision. By and large, the institutions represented on the Board and in the annual general meeting are same. The State Bank of Pakistan is said to have suggested merger of ICP with the IDBP.
According to the decision taken by the ICP Board of Directors on August 26 later endorsed in annual shareholders meeting on September 23, who were also by and large same persons, the liquid shares (shares that are quoted and traded in market) were distributed among the shareholders in proportion of their shareholding. For other shares, the auction was held on October 10.
With 22.99 per cent shareholding in the ICP, the United Bank has the biggest equity followed by 19.96 of Habib Bank, 19.89 per cent of the National Bank of Pakistan, 12.49 per cent of Muslim Commercial Bank, 4.99 per cent of Allied Bank, 2 per of IDBP, 1.59 per cent of Standard Chartered Bank, 11.49 per cent of State Life Insurance Corporation, 2.50 per cent of Pakistan Re-Insurance Corporation. Other small shareholders of ICP are Citibank, Union Bank, National Engineering Services, National Investment Trust and Premier Insurance Company.
The ICP was established in 1966 through an ordinance to broaden the base of investment and development of capital market in Pakistan. It floated 25 mutual funds and one State Enterprise Mutual Fund which were clustered into three lots and privatised to two parties in the year 2002 at a very low price when the market was under 9/11 impact.
Market analysts see the events in ICP and IDBP as “slow death” of the two premier financial institutions of Pakistan that played a pioneering role in industrial investment and a catalyst role in development of capital market and strengthened private capital in Pakistan.
Now ironically, the almost dead public sector institutions like Trading Corporation of Pakistan (TCP) and Utility Stores Corporation of Pakistan are being revived and strengthened. “This is happening when an international banker was Pakistan’s finance minister and is now Prime Minister,” a market analyst remarked. “How would one explain this phenomenon,” he asked and wondered whether it was a “conspiracy of events or comedy of errors”.
