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Abu Dhabi Group seeks exit from Pakistan market

January 08, 2011

KARACHI, Jan 8: One of the largest investment groups in Pakistan, Abu Dhabi Group, has been planning to quit the country where it has diversified projects, said industry sources.

Financial sector analysts noted that the Group's strategy became visible when it decided to sell its stakes in the profit-making United Bank Limited (UBL).

Last month, the Group sold out its 20 per cent stakes in the UBL, but still has 5 per cent stakes in the bank.

Financial strategists and analysts said the loss-making Warid Telecom owned by the Group proved fatal for the investor. Warid Telecom is still owned by the Abu Dhabi Group, which has been in search for quite some time to sell out majority stakes, said analysts.

The telecom market sources said the survival under the cut-throat competition became extremely difficult for the companies like Warid as large companies were using all available options to replace others and grab the maximum market.

Financial analysts expressed concern that Abu Dhabi Group, being one of the largest foreign investors, has been losing interest in Pakistan. They said the Group's presence has been a confidence boosting for the market.

Pakistani market has been facing tough time for the last three years and the foreign direct investment (FDI) has been falling sharply. During the first five months of the current fiscal, FDI fell by 21.5 per cent to just $573 million.

The small inflow is limited to few sectors already operating with high profitability like oil and gas exploration, telecom and power sectors.

Banking sources said that the Abu Dhabi Group was in negotiations with a Pakistan banker to find out a way for merger and get rid of the management of Bank Alfalah.

“The deal for Bank Alfalah is in final stage and we are expecting change of management after its possible merger with Silk Bank,” said a senior banker, well informed about the negotiations.

“The Warid investment is denting core earnings, as the bank has to book impairment against it. The bank booked impairment charge of Rs500 million in 3rd quarter of the calendar year 2010, against an outstanding amount of Rs1.302 billion,” said Mohammad Imran, analyst on investment in Arif Habib Limited.

Once the Group succeeds to back out from managing the Bank Alfalah, it would not hold major stakes in Pakistan.

Financial analysts said the Group willing to disinvest its stakes in Pakistan was more involved in Dubai. Dubai has been facing difficult situation after financial crises which began in 2007 causing serious losses to big financial and investment groups.

They said the Group has bought stakes in major profitable ventures in Dubai and would like to encash the available opportunities available in Dubai.