Storming IPOs at stock exchanges
KARACHI: Initial public offerings are back in the headlines and that too with a bang. Stock exchanges round the globe have been tied up with overflowing number of public listings. Some global business groups have even regarded 2014 as the busiest year for book runners, financial advisors and lead managers since 1999-2000 era of the dot-com bubble. Even the record breaking IPO of AliBaba-–the ecommerce titan of the East-–has been marked as the largest ever stock market floatation. Not to omit the interesting case of Pakistan. The initial and secondary public offerings since last year including Engro Fertilizers, Avanceon, Hascol Petroleum, Lalpir, Pakistan International Bulk Terminal, Unite Bank Limited, Pakistan Petroleum Limited remained the major chart-busters at KSE while the upcoming IPOs of Engro Powegen Qadirpur and Saif Power are ready to get on the list.
Putting in contrast to the global IPO trends, it looks like the IPOs and listings on KSE are mainly tilted towards the energy and power sector.
Repatriation of profits recorded at $116.6m
KARACHI: Total repatriation of profits on foreign investments amounted to $116.6 million in the first two months of 2014-15, down 3.9% from the corresponding months of the preceding fiscal year, according to the latest data released by the State Bank of Pakistan (SBP). In August alone, repatriations on foreign investment amounted to $56.4 million, which was down by 36.5% from the corresponding amount repatriated in the same month of the last fiscal year.
In 2013-14, the repatriation of profit from companies operating in Pakistan to their stakeholders based in foreign countries amounted to $1.2 billion, up 12.6% from the repatriation of a little over $1 billion recorded in 2012-13. Pakistan received direct investment from sources based in foreign countries amounting to Rs87.1 billion during the first two months of 2014-15, which equals 74.7% of the funds that foreign companies repatriated as profits/dividends over the same period. Profit repatriation in August alone was 89.4% of the foreign direct investment (FDI) of $63.1 million that Pakistan received during the same month.
Net FDI in 2013-14 was $1.6 billion as opposed to the profit repatriation of $1.2 billion in the same year. The reason for exceptionally high FDI in the last fiscal year was the receipt of the proceeds of the spectrum auction in May.
14pc growth in revenue collection despite sit-in
ISLAMABAD: Despite ongoing tension in the federal capital for more than one-and-a-half-month, the Federal Board of Revenue witnessed 14 per cent growth in revenue collection in the first quarter of the current fiscal year from a year ago. In absolute terms, revenue collection in July-September 2014 reached Rs549 billion from Rs481bn a year ago. In the budget 2014-15, the government had projected a revenue collection target of Rs2.810 trillion as against Rs2.266tr collected in last fiscal year, an increase of 24pc. The collection in September stood at Rs230bn as against Rs202bn over the corresponding month of last year, reflecting an increase of 14pc.
Revenue collection witnessed a growth of 3pc in July 2014, followed by an impressive 24pc growth in August this year over the corresponding month of last year. A tax official told Economic Affairs that revenue collection may witness more growth when revenue figures would be finalised in the next couple of weeks. He said growth in revenue collection was achieved despite ongoing tension in the country. The official said most of the revenue was generated through Karachi ports, therefore, sit-ins had little impact on revenue collection.
FBR selects 77,500 tax returns for audit
ISLAMABAD – The Federal Board of Revenue on September 26 has selected 77,500 tax returns of six categories for audit through random computer balloting for the period from 1st July 2012 to 30th June 2013.The government has selected audit cases up to 12 percent of total returns filed by taxpayers for the Tax Year 2013 (Income Tax)/Tax Period July 1, 2012 to June 30, 2013 (Sales Tax/FED), as it selected 77,500 cases out of total returns filed 9,70,537.Random computer ballot was conducted here today at Federal Board of Revenue, Islamabad for selection of cases for audit for Tax Year 2013 and Tax Period 1st July 2012 to 30th June, 2013 in respect of Income Tax, Sales Tax and FED at FBR House, Islamabad.
The Minister for Finance, Revenue, Economic Affairs, Statistics and Privatisation, Senator Muhammad Ishaq Dar was the chief guest on the occasion. Random computer ballot was conducted in respect of six categories i.e. Corporate cases of Income Tax, Sales Tax, FED and non-corporate cases of Income Tax, Sales Tax and FED. Senator Ishaq Dar initiated the ballot process by pressing the computer button. Representatives of various Chambers and Tax Bars also participated in the ballot process.
OGDCL shares divestment, Sukuk bonds auction in October
ISLAMABAD: To get pending IMF tranche worth $550m, government of Pakistan wants to complete these two important transactions before IMF’s executive board meeting, Pakistan would complete two important transactions next month (October) by disinvesting the shares of OGDCL and auctioning of Sukuk bonds for getting pending IMF’s tranche worth $550 million, which has been delayed due to political uncertainty in the country. Pakistan has failed to satisfy the International Monetary Fund (IMF) on targets set for receiving fifth tranche worth $550 million mainly due to the sit-ins of Pakistan Tehreek-I-Insaf (PTI) and Pakistan Awami Tehreek in federal capital for almost one and half months.
The government has estimated to generate $850 million from disinvesting shares of OGDCL and $1 billion from Sukuk bonds. However, the government has decided to expedite the process of disinvesting 10 percent shares of the OGDCL. The Cabinet Committee on Privatization (CCOP) on September 15 accorded approval to the divestment of 10 per cent government shares in Oil and Gas Development Company Limited (OGDCL).
Strategic sales of national assets to follow public offering of OGDCL
KARACHI: The government of Pakistan will carry out strategic sale transactions of Heavy Electrical Complex and National Power Construction Corporation following the secondary public offering of Oil & Gas Development Company (OGDCL), a top government official told Economic Affairs. Chairman Privatization Commission Mohammad Zubair said the privatisation of distribution companies and generation companies is also in advance stage. They would be offered for strategic sales soon, he said. The strategic sale of Heavy Electrical Complex would take place in November 2014, while National Power Construction Corporation would be put for sale in January 2015.
Zubair said the forex reserves need to be enhanced as the recent political impasse inflicted a severe blow to the economy in shape of, for example, postponement of $1.0 billion Sukkuk issue, $550 million IMF (International Monetary Fund) tranche under extended fund facility and other such receipts. Speaking at an analyst briefing pertaining to the secondary public offering of OGDCL, Zubair said that OGDCL transaction was a perfect fit for investors. He said the government is expecting an over-subscription. The secondary public offering of OGDCL would build up a momentum and we will be undertaking strategic sales transaction in the months to come,” he said.
Steel mill receives Rs1.75b
KARACHI: Pakistan Steel Mills (PS) announced that it has received Rs1.75 billion. The payment is part of the restructuring package of Rs18.5 billion that the government had announced for the mill. It is the first installment of the second tranche of the Rs18.5-billion package. The released sum includes Rs1 billion as the current installment, while Rs750 million is for the remaining amount of the fourth installment of the first tranche, the press release said.
The management has also decided that salary for 45 days, from mid-July till the end of August, will be disbursed. Moreover, the remaining amount will be utilised for the opening of letter of credit (L/C) for procurement of imported raw material (coal or iron ore) local raw material, capital repairs, and payment of utility bills.
PSMs to reach 77pc production target by December
KARACHI – Federal Minister for Industries and Production Ghulam Murtaza Khan Jatoi said that production of Pakistan Steel Mills had increased to 35 per cent as it was promised by the CEO of Pakistan steel that it would reach 77 per cent by December, 2014. He was talking to journalists after cutting ribbon to inaugurate 10th Build Asia 2014 International Building and Construction Industry Show- at Expo Centre which will continue till Sept 25. He said that the incumbent CEO of Pakistan Steel in the last briefing had told Federal Finance Minister that according to their promise regarding increasing production of the mills currently the production had reached 35 per cent and it would touch 77 per cent mark by Dec 2014. He said that if the promised production is attained the government has planned to search a strategic partner (SP) for the mills and after 30 per cent share-transfer the management of the Mills would be handed over to the SP.
The government had approved Rs.18.5 bn bail-out package for Pakistan Steel for continuing the jobs of its employees to earn and help it stand on its own feet, he added. Jatoi speaking about the exhibition said that it gives an opportunity to learn that what is happening in the industries of building and construction in the country and other countries of the world.
Dollar falls, but fails to satisfy market
KARACHI: With the departure of last Haj flight on September 29, the demand for dollar reduced in the open market. It forced the price of the greenback to come down, but not up to the expectations of the market. Currency dealers said they deposited 95 per cent of the surplus in banks, reflecting the absence of buyers in the market. Dealers said the dollar slid to Rs102.30 at the close of the day. They believed that it may fall as buyers are not available for the greenback.
The departure of last Haj flight ended the dollar demand. We submitted almost all dollars to banks,” said Malik Bostan, chairman, Exchange Companies Association of Pakistan. He said that in August money-changers deposited $300 million in banks. “We hope the total dollar deposits in banks in September could be between $400m and $500m.” However, he maintained that the real cause of higher dollar prices in the open market was the exchange rate in the inter-bank. The inter-bank has been under pressure for the last couple of months and dollar remained around Rs102.80.
China to invest $130 million in Gharo wind power project
KARACHI – The Sindh government has gained another Chinese investment of $130 million for establishment of 50MW wind power project near Gharo city (Sindh). This project is executed by two private companies which include Hydro China and Dawood Power (Private) limited under their joint venture. The financing of this project would be by the Chinese state owned bank, whereas the Sindh government has allotted 1720 acres of land to the company after it obtained LoI for 50MW wind power project from Alternate Energy Development Board (AEDB), NoC on Initial Environment Examination (IEE) report from SEPA, generation license and, upfront tariff from NEPRA and Energy Purchase Agreement (EPA) with NTDC.
The financial close of this project is expected by the end of this year and the construction will start from January 2015. The total construction period would be 18 months and commercial operation of this project would be before June 30, 2016. Chief Minister Sindh Syed Qaim Ali Shah witnessed sub lease (land) signing between AEBD and Hydro Dawood China Wind Farm (50 Mw) at CM House Karachi.
China took 12.3 per cent of world economy in 2013
Chinese economy consisted about 12.3 per cent of the world total in 2013, Chinese state news agency Xinhua has reported. According to the National Bureau of Statistics (NBS) China’s GDP was 56.9 trillion yuan (9.32 trillion US dollars) in 2013. GDP per capita was 41,908 yuan or 6,821 US dollars in 2013. The data indicates a remarkable difference from 1952, when China’s GDP was 67.9 billion yuan (11.05 billion US dollars) and GDP per capita was just 119 yuan (19.37 US dollars).
The second largest world economy has grown 122 times in the last 60 years with an average growth of 8.2 per cent. The service sector has also shown outstanding performance. In 1952, agriculture consisted 51 per cent of the total economy followed by service sector 28 per cent and industry 21 per cent. In 2013, the service sector took largest share with 46 per cent of the total economy.
Banking spread reaches nine-year low at 5.75pc
KARACHI: The banking spread – the difference between lending and deposit rates – reached nine-year low at 5.75 percent in August, official data suggested on September 25. The rate stood at that level in February 2005. When compared with July, the August spread softened 20 basis points. Farid Aliani at KASB Securities attributed this to slide in lending rate by 14 basis points to 10.92 percent, a level which was seen last time in October 2006 when the discount rate stood at 9.5 percent. The State Bank of Pakistan left the policy rate unchanged at 10 percent for the next two months in the monetary policy announcement in September.
According to the official data, the banking spread was recorded at 6.04 percent for the last eight months (January-August 2014), down 22 basis points over the same period last year. Total advances went up by 15 percent and private sector’s credit grew by 12 percent in August 2014 – fastest growth since 2008. In line with the market expectation, the data showed banks’ interest in Pakistan Investment Bonds visibly softened post-June 30, 2014. The banking sector parked only Rs18 billion in PIBs in July-August 2014 with their total holdings till August worth Rs2.2 trillion. In the first half of this calendar year, banks invested Rs1.4 trillion in the bonds.
PIA posts Rs10.1bn loss
KARACHI: Pakistan Internat¬ ional Airlines Corporation (PIA), the national flag carrier with Rs129 billion in total assets, posted loss of Rs10.1bn for the six months ended June 30, 2014 on its unconsolidated condensed interim profit and loss account. Although deep in deficit, the loss decreased by 45pc from Rs18.4bn suffered in the corresponding six months of 2013. The airline turned out gross profit at Rs339m for the latest six months from loss of Rs2.6bn last year. Yet, a deeper analysis shows that “exchange gain” of Rs5.2bn in six months 2014, in place of “exchange loss” of Rs1.5bn YoY, helped turn the results around. Against the paid-up capital of Rs28.8bn and reserves of Rs4.4bn, PIA carries accumulated loss amounting to Rs208bn on its balance sheet.
For quarter ended June 30, 2014, PIA showed loss of Rs8.1bn, down from loss of Rs9.8bn YoY, while revenue increased to Rs25.4bn, from Rs22.7bn. Exchange loss decreased to Rs370m for 2Q2014, from Rs463m same time last year. However, the bottom-line for the 2Q2014 was bruised by sharp decline in ‘other income’ to Rs128m, from Rs1.2bn in same quarter 2013. NML dividend Nishat Mills Ltd (NML) announced FY14 unconsolidated earnings of Rs5.51bn, representing earnings per share (eps at 15.68).
SBP sanctions Meezan’s acquisition of HSBC
KARACHI: The State Bank of Pakistan (SBP) has sanctioned the scheme of amalgamation of HSBC Bank Middle East-Pakistan with and into Meezan Bank, according to a notice sent to the Karachi Stock Exchange (KSE) on September 24. The scheme will be effective for 60 days, it added. Earlier in May, the SBP had allowed Meezan Bank to acquire Pakistan operations of HSBC subject to the fulfilment of all regulatory requirements. An indirect, wholly owned subsidiary of HSBC Holdings, HSBC Pakistan consists of 10 branches and had total assets of Rs48 billion at the end of 2013. Meezan Bank has already stated that it intends to make the operations of HSBC Shariah-compliant while ensuring that the existing customer base continues to receive uninterrupted banking services.
Meezan Bank has the experience of acquiring a foreign bank and converting its operations from conventional to Islamic. It acquired Societe Generale in Pakistan through a similar transaction in 2002. The Competition Commission of Pakistan also gave its go-ahead to the proposed transaction and issued a no objection certificate in August. The deal is expected to complete before the end of 2014.
Orix Leasing to tap Islamic finance market
KARACHI: Orix Leasing Pakistan Limited (OLPL) plans to tap the high growth Islamic finance market. The company has chosen an innovative way to attain its objective. It has entered into a non-binding Memorandum of Understanding (MoU) with Standard Chartered Bank (Pakistan) Limited (SCBPL) with regard to a prospective merger/amalgamation of Standard Chartered Leasing Limited (SCLL), a subsidiary of SCBPL with and into OLPL or acquisition of SCBPL’s 86.45 per cent equity stake in SCLL. The MoU further provides the acquisition of SCBPL’s 100pc stake in Standard Chartered Services of Pakistan (Private) Limited and acquisition of SCBPL’s 20pc stake in Standard Chartered Modaraba.
The Orix company Secretary Effat Assad went on to state: “This stake is held 10pc directly and 10pc indirectly through SCSPL”. Yet he cautioned that there was no certainty that the MoU would result in a binding transaction. The transaction structure and implementation plan would be subject to: due diligence of SCLL, SCSPL and SCM by OLPL which would commence shortly.
ADB loans for infrastructure projects on cards
ISLAMABAD: The Asian Development Bank (ADB) is likely to approve multi-million dollars loans to Pakistan – for transport infrastructure projects – during the current visit by the ADB President to Islamabad. Mr. Takehiko Nakao is scheduled to visit Islamabad from September 15 to 17 during which both sides will sign the multimillion dollar loan agreement. The loans are to finance the construction of National Trade Corridor (NTC) phase for establishing road linkage from Hassan Abdal to Karakorum Highway (KKH). It’s not yet clear though whether Mr. Nakao is going to approve provision of loans to Islamabad for the much-awaited Diamer-Bhasha dam.
Some believe that the ADB may well happen ignore the project; just like the World Bank (WB) did in case of this hydropower project after approving money for Dasu dam. In this regard, USAID has arranged a conference in Washington D.C in October 2014 on the sidelines of the IMF/WB meeting to sensitize donors’ and investors about the Bhasha dam. The existing portfolio of ADB for Pakistan stands at $5 billion, mainly for cash-bleeding energy sector.
After the country entered the IMF program, the ADB has restored its program loans for Pakistan. However, the ADB President will be visiting Islamabad at a time that talks between Pakistan and Fund have been temporarily stalled in the wake of lingering political instability.
Pakistan Rupee Exchange Rate