Privatisation Commission restarts work on IPO: Prime Minister discussed PSM issue on June 12

The Privatisation Commission (PC) has started again work on the Initial Public Offering (IPO) for Pakistan Steel Mills (PSM), which will be a complete reversal of the decision taken by an inter-ministerial committee.
A couple of months ago, an inter-ministerial meeting chaired by Mahmood Nawaz Shah, Member, PC Board, and attended, among others, by Joint Secretary Industries Ministry Arifa Saboohi, Director General I&T PC Javaid Ali Khan and Consultant PC Engineer Zahid Aziz, decided to shelve IPO for PSM until its unbundling and completion of essential repairs.
Sources told Business Recorder that Prime Minister Shaukat Aziz, at a meeting of Cabinet Committee on Privatisation (CCoP) on June 12, had discussed the issue of PSM in detail, and directed the PC to complete its IPO as soon as possible. In light of Prime Minister''''s directive, the PC restarted work on the IPO, but its timing was required to be approved by the Prime Minister, sources said.
Industries Ministry is said to be of the view that PSM had earned profit of Rs 90 million up to December 2006 against the projection of Rs 1.5 billion for the fiscal year with estimated production of 85 percent capacity utilisation.
According to the PSM parent ministry, the earning per share (EPS) was estimated at Rs 0.82. PC Board Member Mahmood in his comments said that IPO of any company observes transparency as the figures are made public and the management is accountable as far as performance is concerned. The inter-ministerial committee had debated in detail whether PSM transaction should be initiated through IPO or direct strategic sale, but there were divergent views on the proposals.
However, the committee felt that to carry out IPO, there were certain prerequisites which needed to be fulfilled. One of these is unbundling of assets, which needs to be completed in a manner as was adopted in the case of strategic sale, sources said.
They said that Industries Ministry had spelled out several complexities involved in the unbundling of the assets, saying that the duration of time required to resolve such thorny issues could not be predicted. It advised the committee not to take any hasty decision and wait for a few months down the road when the plant is in good shape after essential and critical repairs, sources added.
The representative of Industries Ministry was of the view that future profitability and production were not predictable at the present stage. Similarly, the valuation of the shares may also be difficult to estimate. The federal government has already filed a review appeal with the Supreme Court of Pakistan against the decision in which PSM privatisation process was declared null and void.