LAST week, the engineering conglomerate Siemens Pakistan announced its plans to sell off its healthcare business. The company explained in a filing with the stock exchange that the sale was “due to Siemens AG’s overall global strategy of reorganising the healthcare business in order to meet customer and industry needs”.

Siemens AG had transferred its global healthcare business to Siemens Healthcare GmbH, a wholly owned subsidiary, from May 2015, the notice added.

When the company’s board had first announced its decision in August to dispose of the healthcare business, it said it was doing so to “transfer the business at a fair market value to a private limited company to be incorporated in Pakistan by a Siemens subsidiary, subject to requisite approvals”.

While Siemens Pakistan forges ahead with right-sizing and restructuring, the additional purchase of its shares by Siemens AG Germany has raised its stake in the Pakistani subsidiary to 74.65pc

The market had believed that like its German parent, the Pakistani subsidiary of Siemens AG was also set to spin-off its healthcare business into a spate entity. Yet, last week’s notice looks like there has been a change of plans for the company. “The manner of sale would be through negotiations based on fair market value as determined by external auditors,” the notice said.

The company put the value of its net assets at Rs68m and the current market/fair value at Rs119m. This suggests sale to an outside party.

Yet, it is not the disposal of the healthcare business that has raised eyebrows in the market, but Siemens Pakistan’s gradual disposal of assets. It all began from September 30, 2013, when the company said it had agreed in principle to sell its land and buildings at the Estate Avenue in SITE, Karachi, in one or more parcels.

An old market hand lamented that once a landmark facility for the manufacturing of heavy electrical engineering products, Siemens Pakistan looked to have lost its glory. On October 15 last year, Siemens contemplated disposing of its immovable properties in Islamabad’s Sector 1-9. Its board had also decided to close down its diesel-generating sets and locally manufactured non-standard motor business segments.

Meanwhile, effective from this Thursday, the company would cease to participate in further business in Afghanistan due to the withdrawal of sales rights by Siemens AG for the country. The company had been operating in Afghanistan since 1925, initially through Siemens India, before its Pakistani subsidiary had taken over the business in 2008.

Yet, even more surprising was the company’s decision to quit its core transformer business. All of this, together with Siemens AG Germany’s silent ‘off-market’ deal of accumulating 0.716m shares of the Pakistani subsidiary from the stock market — valued at $8.47m — set tongues wagging.

Many market participants believed that Siemens was following the lead of Unilever Pakistan, which had earlier bought back all of its shares from the market and sought delisting from the stock exchanges.

Although that does not appear to be the case and Siemens is forging ahead with right-sizing and restructuring, the additional purchase of its shares by Siemens AG Germany has raised the parent firm’s stake in the Pakistani subsidiary to 74.65pc.

The National Investment Trust and ICP hold 12.64pc shares, leaving the company’s free-float at just 4.42pc. Quoted on the KSE’s ‘cable and electrical goods’ division, the Siemens stock closed last Tuesday at Rs932.67 a share.

Despite its relatively small capital of Rs82.5m, the company has generally disbursed handsome cash dividends in the range of 100 to 200pc, with the biggest share of course going to its overseas parent.

As many listed companies have small free-floats, it ought to give the regulators’ some food for thought. Can listed companies be asked to maintain a certain respectable portion of their paid-up shares as floating stock for small investors?

Siemens Pakistan is yet to issue its detailed annual report for the year ending September 30. However, according to a notice sent to the bourse on December 17, the company said it posted a pre-tax loss of Rs335.9m for FY15, up from a loss of Rs234.7m in FY14.

Meanwhile, its loss-after-tax amounted to Rs528.2m, marginally up from last year’s loss of Rs523.8m. The company’s gross profit dropped to Rs493.9m from Rs704.7m as its net sales dropped to Rs9.3bn from Rs9.8bn in FY14. Yet, it declared a final dividend of Rs10 per share (100pc).

In the their third-quarter report to shareholders, the company’s directors had asserted that “the loss during the [first three quarters] is mainly incurred on account of under-absorption of fixed cost due to reduced sales and losses incurred on certain contracts”.

Siemens’ businesses are now reportedly bundled into nine divisions as the company concentrates in the fields of electrification, automation and digitisation.

During the nine months ending June 30, contribution to the firm’s top-line by various divisions was: energy management (57pc), process industries and drives division (16pc), digital factory (11 pc), power and gas (8pc) and healthcare (5pc). By June 30, the company held ‘assets classified as held for sale’ worth Rs1.67bn.

Published in Dawn, Business & Finance weekly, December 28th, 2015