Pak scraps stake sale of oil giant shares due to low offer

Pakistan has scrapped the sale of 7.5 per cent stake in state-run oil and gas major OGDCL after investors subscribed to only half of the total shares on offer, dealing the first blow to the cash-strapped government's ambitious privatisation agenda.
Of the 311 million shares of the Oil and Gas Development Company Limited (OGDCL) put up for sale for a minimum price of Rs 216 per share, the government received offers for only 162 million shares at the conclusion of a three-day bidding process, Privatisation Commission Chairman Muhammad Zubair said yesterday.
The Express Tribune today reported that the decision to scrap the transaction was taken by the Cabinet Committee on Privatisation (CCOP) in a meeting held the same day.

The meeting was chaired by Finance Minister Ishaq Dar via video link from Dubai. "Under the circumstances, it was not appropriate and feasible to go ahead with the divestment plan of the OGDCL," Dar said.
"Pakistan's economy is resilient enough to pass through this difficult phase...There is no need to go ahead with the deal in an unfavourable atmosphere," he said.
He added that the shares would be offered for sale when the situation in the international market favours Pakistan.

The government initially hoped to generate USD 830 million by selling 7.5 per cent stake in the OGDCL. It lowered its expectations to USD 696 million last week when the CCOP approved the minimum share price of Rs 216.

Authorities sustained a blow following the closure of the book-building process when it came to light that investors were offering USD 342 million for just 52 per cent of the shares put up for sale.
"The OGDCL is an important asset of Pakistan and the government cannot sell the stake at such a low rate," he said.
"Had all 311 million shares been fully subscribed, the government would still have given the go ahead for selling the stake at Rs 216 per share," he said.
He also said the cancellation of the sale would not affect the country's economy in a big way.

Zubair added that the financial advisers hired by the government had suggested setting the price at Rs 206 per share. He said the fall in global oil prices was the most important factor behind the cold response from investors.
Although the decision to scrap the deal will save the national exchequer from losses worth at least Rs 15 billion, the move may serve a blow to the expectations of the government and investors.
For the current fiscal year, the government anticipates receipts worth USD 4.5 billion from privatisation proceeds, USD 380 million of which would have been generated by the OGDCL transaction.

The next big upcoming privatisation transaction is that of Habib Bank Limited (HBL), expected to be undertaken early next year. The government hopes to get USD 1.2 billion by offloading its remaining 42 per cent shares in the bank.