$1.4 Billion offered for HBL Shares
The government’s privatisation programme got a boost as it received $1.4 billion worth of bids for the remaining 609 million HBL shares, thanks to the interest shown by both foreign and domestic investors.
The offer for sale was made through stock exchanges and the share issue, which was launched with a floor price of Rs166 per share, was fully subscribed at the end of the fourth day of book building, which began on Tuesday, said a book manager.
Out of roughly $1.4 billion, the foreign investors offered $1.05 billion worth of bids while local investors made offers of Rs35 billion or $345 million.
The Privatisation Commission board had recommended the minimum price in the range of Rs170 to Rs190 per share, while financial advisers had recommended Rs160 per share.
Ignoring the board’s recommendation, the Cabinet Committee on Privatisation (CCOP), headed by Finance Minister Ishaq Dar, approved the minimum price at Rs166 per share on Monday.
The government kept the price slightly lower in a bid to woo investors to participate in the country’s biggest-ever capital market transaction.
The CCOP that will meet on Saturday is expected to approve the strike price in the range of Rs168-169 per share. It will offer a discount of roughly 9.5% or Rs17.6 per share over Rs185.62, which becomes the benchmark for determining the floor price.
Offering a discount is common but analysts were expecting a better floor price given HBL’s financial strength.
It will be the highest discount when compared with the three capital market transactions that the government undertook to sell its stake in United Bank Limited, Allied Bank Limited and Pakistan Petroleum Limited. HBL is the country’s biggest bank in terms of assets and branch network.
At Rs168-169 per share, the government will end up raising $1.1 billion. It will sustain a loss of Rs10.7 billion on the benchmark price of Rs185.62 per share.
The Ministry of Finance is desperately looking to complete the HBL’s transaction that will help it make up for the shortfall in tax collection. For the current fiscal year, the government has set the target of roughly $2 billion for privatisation proceeds.
However, despite raising around $1.1 billion from the HBL offer, it will still fall short of the target.
As expected, the Agha Khan Fund for Economic Development got the maximum shares. However, it did not directly buy the shares and came through a third party, said an official who handled the book-building process.
“Agha Khan Fund controls majority of shares in HBL and it has given an offer worth $200 million,” he added.
At the strike price of Rs168, the Agha Khan Fund will get 121.4 million or roughly 20% of the 609 million shares. It will increase the Agha Khan Fund’s holding in HBL to 59.7%, said a stock broker.
The Commonwealth Development Corporation and International Finance Corporation offered bids of $108 million.
Earlier, the State Bank of Pakistan set aside the condition of holding only up to 5% of the total stake aimed at facilitating big investors. This helped the Commonwealth Development Corporation and the Agha Khan Fund to acquire more shares.
After the transaction, the free float of HBL will increase from the present 7.5% to 49%.
The government has hired a consortium of financial advisers comprising Credit Suisse, Deutsche Bank, Elixir Securities and Arif Habib Limited.
It should use $1 billion as equity to invest in big infrastructure projects that require massive investment, according to market analysts. They said the money could be used to finance $5 billion worth of projects.
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