The government has scrapped the Oil and Gas Development Company’s (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.The government had pitched 311 million shares at a minimum price of Rs 216 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 Chairman Privatisation Commission Mohammad Zubair.
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 Rs 216 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 Rs 15 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.
The government hopes to get $1.2 billion by off-loading its remaining 42% shares in bank.
“Under the circumstances, it was not appropriate and feasible to go ahead with the divestment plan of the OGDCL,” said Finance Minister Ishaq Dar.
He said the shares would only be offered for sale when the situation in the international market improves to Pakistan’s best advantage.
Dar said Pakistan’s economy had the resilience to go through this difficult phase, and that there was no need to go ahead with the deal in an unfavourable atmosphere.
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 Rs 206 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.
