ISLAMABAD: The privatisation process of Pakistan Steel Mills (PSM) has reportedly hit a snag as Chairman PSM Board Aamir Mumtaz has tendered his resignation as member Transaction Commission due to differences on the final draft of 'due diligence' prepared by the consultants, well-informed sources told Business Recorder.
Chairman PSM Board, a US citizen, appointed on the recommendations of the then Advisor to Prime Minister on Industries and Production, Abdul Razak Dawood did not attend the recent meetings of the Transaction Committee.
When his continuous absence from Transaction Committee meetings was noticed at a recent meeting, an official informed the Committee members that he has resigned from the Committee. Chief Executive Officer (CEO) appeared uninterested in PC meetings.
"Aamir Mumtaz was unhappy with the PC for not accommodating viewpoint of PSM in due diligence reports," the sources added.
M/s Joseph Lobo (Pvt) appointed as valuator of PSM’s assets, i.e., plant, calculated a value of over Rs 500 billion, which according to the PC is far above actual value of plant and machinery and not acceptable to investors.
Some of the Committee members raised questions on the role of PC in downward revision on valuation of M/s Joseph Lobo.
On April 26, 2021, Transaction Committee also discussed the following issues/documents: (i) final draft of due diligence report submitted by the FAC in September/October 2020 along with Financial Advisor responses to the queries/comments by stakeholders’ committee members; (ii) draft Expression of Interest (EoI); (iii) draft Request for Statement of Qualification (RSOQ); and (iv) draft investment teaser.
The Transaction Committee is conducting a meeting to get approval on due diligence reports paving the way for making the payments with the contract value of about Rs 400 million. The same company was appointed FA during the last effort for privatisation of PSM. It is said that the present reports are a replica of old reports with changes in only financial numbers provided by audited accounts of PSM.
“PSM has reservations on workable and maturing privatisation of PSM in the absence of booked value of plant, equipment, machinery, building and land which constitutes about 1230 acres (registered as a PSM subsidiary). The valuation has been done by the valuer appointed by PSM and it is awaiting confirmation from the Board this week," the sources continued.
After the Board's approval, it will fix share value, with the offer of majority shares to the new party. There is no restriction on the size of shares and as approved by CCoP the privatisation of majority shares indicates 51% sale for privatization with no ceiling or cap.
Sources in PC claim that the value of lease of PSM land per acre is standard. The actual issue is determination of plant and machinery value which is yet to be settled.
Secretary PC recently sent an official delegation to Karachi to discuss the evaluation of PSM’s assets as the evaluated worth as determined by the evaluator is higher compared to PC’s own estimate.
Last Friday, a progress review meeting of PSM transaction was co-chaired by Minister for Privatisation, Mohammadmian Somroo and the newly-appointed Minister for Industries and Production, Khusro Bakhtiar. SAPM on Institutional Reforms Dr Ishrat Hussain, Secretary Industries and Producton, Afzal Latif and Secretary Privatisation, Hasan Nasir Jamy also attended the meeting.
The government constituted a subsidiary recently to proceed with the transaction with following directors on the Board of Directors in accordance with section 165 of Companies Act, 2017: (i) Amir Mumtaz - Independent Director, Chairman PSM Board; (ii) Additional Secretary (MoI&P) - ex-officio; (iii) Joint Secretary (Large Enterprises Development) MoI&P - ex-officio; (iv) Secretary Finance or his nominee not below the rank of Joint Secretary or BPS-20 (ex-officio); (v) Secretary Privatisation or his nominee not below the rank of Joint Secretary or BPS-20 (ex-officio); (vi) Secretary, Board of Investment (BoI) or his nominee not below the rank of Joint Secretary or BPS-20 (ex-officio; and (vii) Chief Executive Officer (CEO), PSM (executive director).
When contacted for comments on the resignation of Chairman PSM Board from the Transaction Committee, Privatisation Commission replied "we have no information yet".
Aamir Mumtaz, however, could not be reached for his comments.
During the last 30 months of the PTI government – from July 2018 to December 2020 - losses of around Rs 45 billion and liabilities of around Rs 96 billion relating to Pakistan Steel Mills inflicted on the national exchequer.
Copyright Business Recorder, 2021
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