With regard to the charges regarding UBL capital market transaction, here are the facts: imran has issued a whitle paper last thursday against what he calls corruption cases and he has cited the ubl capital market transaction as a case in point. According to him pakistan has been cheated for Rs 9 bio. Nothing can be more hilarious than this and reflects to what extent he is ready to go to ruin the system. At least he should care for the sake of pakistan and at least leave few things out of politics. Heres the reply i have sent to imran with regard to his allegation. -- Every capital market transaction of this nature in Pakistan and around the globe is sold at a discount. For example a similar UBL transaction done in 2006 by the then privatisation commission headed by Hafeez Shaikh had given a discount of 10 % to the prevailing market price. Compare this with only 7 % given in this particular transaction. When deciding on the level of discount, we also look at all banking capital market transactions in Asia during the last several years. On average during the period 2008 - 2014, the average discount given was 7.9 % in various asian countries which include Malaysia, Indonesia, India, Sri Lanka, Thailand etc. -- According to the white paper, Govt. of Pakistan lost approx. Rs 9 billion as a result of selling it cheap. This is the most outrageous charge and is based on sheer ignorance or simply to malign the government. The market price on the date of the transaction was Rs 170 and the white paper is proposing that the govt. should have sold it for Rs 195. Would anyone in the world buy it at 195 when the market price is much lower. Why would anyone not buy it at 170 from the market? -- The reason that subsequent to the transaction, the market price rose to Rs 195 is simply because when the additional number of shares come in the market as a result of govt. of Pakistan action, the total shares increase gives opportunity to the buyers to come and bid for additional shares available in the market. Its a standard process that market price increases after such a transaction. This is the additional benefit of offloading shares as we did in the market in June. It has directly contributed to increase in market capitalization benefiting Pakistans economy. -- No near and dear ones were rewarded with the share transaction as the white paper outrageously mentions. We can challenge if anyone got any favor during this transaction. -- The white paper says that it was sold to unidentified buyers. This is again a blatant lie. All buyers are identified and the information is available with the Karachi Stock Exchange, State Bank of Pakistan and the Securities & Exchange Commission of Pakistan. The list of buyers was also shared with the Board of Directors of the Privatisation Commission and the Cabinet Committee on Privatisation. There are more than 30 international equity funds which bought the shares plus more than 200 domestic equity funds and high net worth individuals. All names are available and is public information. -- No Pakistani investor was squezed out as the white paper wrongly states. Perhaps Mr. Imran Khan is completely unaware of the way the transaction was run. It was done through what is called the book building process which takes order from the international and domestic investors at the same time. Every order coming from accross the globe including Pakistan is recieved and managed by the financial advisor which in this case was Credit Suisse. No individual of the privatisation commission or govt of Pakistan can interfere in this process. No Pakistani can be squezed out as the paper assumes. It would be better for Mr. Imran to have this process checked from any independent brokerage house in Pakistan or abroad to verify the process mentioned here. -- Imran is also totally unaware of the process that is run for a transaction of this nature. A day before the actual transaction date, the board of directors of the privatisation commission meets to determine what is called the floor price. This price is based on the rate prevailing on that particular date and discount is applied. The chairman of the board is just one of the members of the board and has no additional authority. He is like any other independent member. Just for information, the board includes people from the corporate world and business world. At present the board consists of members who have outstanding reputation in the corporate world and the business world. Some of the outstanding members include Zaffar Khan (former chairman Engro, former Chairman PIA, former Chairman PTCL, former Chairman Karachi Stock Exchange and is a legendary corprate executive who is well respected for his professionalism and integrity). It also includes names such as Ali Habib who is chairman House of Habib and is senior executive at Pakistan Business Council. It also has Salman Burney, former Chief Executive of Smith Clime Beecham, Zafar Sobhani, former CEO HUBCO, Arif Saeed of Services group and so on. The board after thorough review and analysis approves the floor price. During the board meeting representatives of line ministry, SECP and State Bank are also present to provide professional input. The input of the 3 stock exchanges, the competition commission of pakistan, cdc and others is also taken. After the board approval, it is then taken to the Cabinet Committee on Privatisation where senior federal ministers and secretaries are present. With the consent of them all the floor price is approved. The same process is repeated after the completion of the orders. In short, it is the collective decision of several competent and professional individuals having understanding of the business, its importance for the pakistans economy and the growth of the capital market. The UBL transaction was the first capital market transaction conducted by the privatisation commission after 8 years and was participated by the worlds best known equity funds from around the globe plus all major equity funds within Pakistan. Every single market player in Pakistan has appreciated the outstanding achievement. Major international publications such as Wall Street Journal, Far Eastern Review, Economist , Bloomberg and others have stated that this is a major achievement of the govt. of Pakistan in very difficult circumstances. (this transaction was done 2 days after the attack at karachi airport). We had to work overnight to assure the investors and build on the confidence which resulted in this transaction. Its a mega success and there was every reason for the Finance Minister to claim the credit as this will go a long way in improving our capital market. Every major institution such as Credit Suisse, Citi Corp, Merrly lynch, London Stock Exchange and the management of all the stock exchanges in pakistan have highly appreciated this transaction. Every major forum such as Pakistan Business Council, OICCI and top business executives have appreciated this transaction. By issuing the white paper Mr. Imran khan is perhaps reflecting his ultimate frustration and trying to malign the govt. of pakistan and creating doubts in the minds of international investor community.
Posted on: Sun, 10 Aug 2014 19:39:23 +0000
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