ISLAMABAD: The government on Wednesday blamed PTI chief Imran Khan and PAT leader Tahir-ul-Qadri led sit-ins for scrapping of OGDCL transaction after investors subscribed to only half of the total shares offered to international and domestic institutional investors, dealing the first blow to an ambitious privatisation agenda. Pakistan was planning to raise $ 4 billion by selling some key state-owned enterprises (SOEs), including national carrier PIA but the plan seems difficult after scrapping of sale of OGDCL.
The government had pitched 311 million shares of OGDCL at a minimum price of Rs216 per share, but received offers for 162 million shares, or 52%, of the total shares at the conclusion of a three-day bidding process, said Privatisation Commission Chairman Mohammad Zubair.
Cricketer-turned-politician Imran Khan and populist cleric Tahir-ul-Qadri led thousands of supporters in weeks of protests outside parliament, pressing for the resignation of Prime Minister Nawaz Sharif over alleged election rigging. The rallies, which began in August, descended into violence at points. They failed to force Sharif from power but destabilised the government for a while.
“Due to sit-ins the share price of OGDCL fell from 274 rupees ($2.60) to 225 rupees ($2.20) and we do not want to sell so low,” Finance Minister Ishaq Dar told a press conference.
“Had there been no sit-in and share price had remained same, the government would have received $600 million, $200 million domestically,” Dar said, noting that a recent slump in international oil prices had also contributed to the lukewarm response.
He said that had the government gone ahead with the sale, it would have only received $180 million from abroad and $160 million locally. “We should not be seen as distressed sellers. Pakistan’s assets will not be sold or disinvested under pressure,” Dar said.
He said the “right message” had gone out and OGDCL shares had risen to around 240 rupees. The Privatisation Commission had offered 311 million shares to international investors, but it got offers for merely 50 percent.
The decision was taken by the Cabinet Committee on Privatisation (CCOP) that met on Saturday after the closure of the book-building process that ran for three days. The government had initially hoped to receive $830 million by selling 7.5% of the company’s stakes. However, last week it lowered the expectations to $696 million when the CCOP approved the minimum share price at Rs216 per share. Authorities sustained a blow after the closure of the book-building process when it was revealed that investors offered only $342 million for 52% of the offered shares.
The decision to scrap the deal would save the national exchequer from a loss of at least Rs15 billion that the government would have caused due to the compulsion to sell the stakes under a condition of the International Monetary Fund. However, the move may serve as a blow to the expectations of the government from the privatisation plan. For the current fiscal year, it has anticipated receiving $4.5 billion from the privatisation proceeds, including $830 million from the OGDCL transaction. The next big upcoming privatisation transaction is that of Habib Bank Limited, which is expected to be undertaken early next year.
Muhammad Zubair said the reduction in oil prices in the international market was the single most important factor that kept the investors at a distance, adding that British Petroleum share prices dropped by 25% in last two months. In the eyes of the investors, the price per price at Rs216 was too high. Financial advisors hired for the transaction had advised the government to set the price at Rs206 per share, however the government did not accept the advice due to losses it would have caused to the national exchequer, said Zubair.
The Pakistan People’s Party (PPP) and OGDCL employees had voiced its reservations against the transaction that would have seen the government sell 10% of its stake OGDCL. Privatisation Commission (PC) Chairman Mohammad Zubair said the government has offered an olive branch to the opposition. The government, which has faced several obstacles in its attempt to go ahead with the transaction, is already struggling to come up with a credible strategy to justify the poor timing that will reduce its earnings by at least Rs15 billion. Zubair admitted that the government was undertaking the transaction during difficult times.
