ISLAMABAD, Dec 11: The caretaker government has agreed to offload Government of Pakistan’s shareholding in seven joint investment companies through Initial Public Offerings (IPOs) with a view to benefit them and at the same time add value to developing portfolio of stock markets.
Informed sources told Dawn that during a meeting with Finance Minister Dr Salman Shah on Monday, senior representatives of Pak-Kuwait Investment Company (PKIC), Pak-Libya Holding Company (PLHC), Saudi-Pak Industrial Agricultural Investment Company (SPIACO), Pak-Oman Investment Company (POIC), Pak-Brunei Investment Company (PBIC), Pak-Iran Investment Company (PIJIC) and Pak-China Investment Company (PCIC) favoured the proposals.
However, they said some of the issues needed to be worked out before formally opting for IPOs.
In this regard, both sides decided that the ministry of finance and the Privatisation Commission should further evaluate the feasibility of offloading some shares of the GOP in joint ventures with these seven companies.
Sources said the issue was earlier discussed between the State Bank of Pakistan and Ministry of Finance and they were informed about the latest business situation in these companies.
They were told that the PKIC, which was incorporated in 1979 was now having its Rs6 billion paid-up capital.
The State Bank of Pakistan is share-holder in the equity of the company on behalf of Government of Pakistan.
With regard to the subject proposal, PKIC favours the proposal as it would not only benefit institutions but would also add value to developing portfolio of the stock markets.
However, it said the following matters have to be initially deliberated between the stakeholders in Pakistan and subsequently with the foreign partners:
Market appetite for shares to be divested through IPO; reaction of the foreign partners for proportionately divesting along with GOP); the changes required in the existing provisions under the joint venture agreement, including concessions granted to JV by GOP.
PLHC: The Pak-Libya Holding Company was incorporated on 14-10-1978. Its paid-up capital presently stands at Rs3.242 billion. With regard to subject proposal it was said that PLHC was established as a “private company” in terms of the Companies Ordinance, 1984, so the right to transfer its shares is restricted and any invitation to the public to subscribe for any share is prohibited. However, according to the joint venture agreement, the induction of third party is possible only with the consent of two partner countries.
SPIACO: Saudi-Pak Industrial Agricultural Investment Company was incorporated on 23-12-1981. Its paid-up capital presently stands at Rs3.0 billion by December 2006. With regard to subject proposal, SPIACO has informed that the proposal is a positive development as it will bring the following advantages:
Instant valuation of the shares, and easing of raising funds from capital market.
The critical factors will be the percentage of shareholding to be off-loaded, pricing of shares, and the timing of flotation. It is presumed that the Saudi government will also have the same option for offloading their part of shareholding to the investors of their choice in the kingdom of Saudi Arabia.
However, the Saudi government would be consulted in the matter at an appropriate time. Its BOD and the shareholders have already approved the conversion of the current private limited status of the company into public limited.
The company is now close to receiving the approval of the governments of the two countries to the change in corporate status of the company.
POIC: PaK-Oman Investment Company company was incorporated on 23-7-2001. Its paid-up capital sands at Rs6 billion at present. GOP is direct share-holder in the equity of the company. The POIC board has in principle decided that the company should be made public listed by having one or two following approaches to offer additional equity to the public up to 20 per cent or to offer existing equity to the public up to 20 per cent.
It was also decided that as and when Pak-Oman would go public through IPOs, listing would be made at the stock exchanges of both the countries.
PBIC: The Pak-Brunei Investment Company was incorporated on 25-11-2006. Its paid-up capital stands at Rs3.05 billion. GOP is direct share-holder in the equity of the company. With regard to subject proposal, PBIC has informed that DFIs are currently over-capitalised relative to business activities; this translates into lower return on equity, which is most likely to attract public investors in case of a public offering.
It wanted that a decision to take JICs public should be made after a thorough evaluation of key objectives / strategic; focus, future business plan and profitability targets, and regulatory framework.
PIJIC: The Pak-Iran Joint Investment Company was incorporated on 15-1-2007. Its paid-up capital stands at Rs4 billion. About the proposal, the PIJIC has informed that they see significant benefits to the GOP vis-a-vis off-loading the shares through IPOs. However, they would like to add that the following issues need to be addressed internally by the GOP itself: A policy of liquidating mature investments (such as those in PaK-Kuwait, Pak-Libya and SAPICO is generally a welcome step as it would have multiple benefits.
It would deepen Pakistan’s capital markets and increase its market capitalisation. It would bring in private sector representations on the boards of these companies and provide them to independently raise capital in future if they so desire rather than be dependent upon the GOP and the JV partner to inject more capital.
It is also said that some of the DFIs being considered have significant strategic investments. As such the share-price at IPO should reflect the true value of these strategic investments as well as the current and future earning potential of these DFIs.PCIC: The Pak-China Investment Company was established in July, 2007. Its paid-up capital stands of Rs4.253 billion. The GOP is direct share-bolder in the equity of the company.
It is believed that all joint investment companies favour the offloading of their share-holding through IPOs in consultation with the respective foreign partner countries.