Pak Suzuki set to consider delisting from PSX, share price hits upper-limit

Pak Suzuki Motor Company (PSMC) will review and consider the majority shareholder’s intent to purchase all outstanding shares of the company and delist from the Pakistan Stock Exchange (PSX), the company said in a notice to the bourse on Thursday.

“This is to inform you that (a) meeting of the Board of Directors of PSMC, will be held on Thursday, 19 October 2023 to review and consider the majority shareholder’s intent to purchase all outstanding shares of Pak Suzuki Motor Company Limited held by other shareholders and de-listing under Rule 5.14.1. of the listing regulations,” read a notice to the PSX.

The automaker said the decision taken by the board shall be communicated right after the board meeting.

“The decision to delist suggests the company is not seeing an incentive to remain listed at the bourse as compliance cost is high,” Fahad Rauf, Head of Research of Ismail Iqbal Securities Limited, told Business Recorder.

“The company likely believes its shares are available at a cheap valuation so they are intending to buy it,” he said.

The announcement resulted in the company’s share price – under pressure for months – hitting its upper limit during trading on Thursday.

Citing a drop in sales and high finance costs, PSMC earlier announced losses to the tune of Rs9.68 billion in the first six months of FY2022-23. During the course of the year, the company has made numerous announcements of shutdown of both its vehicle and motorcycle plants in Pakistan.

The loss did not surprise analysts as Pakistan’s auto sector has been facing challenges on several fronts, including high energy costs, political instability, and an inability to secure letters of credit for imports amid a severe dollar shortage.

“The delisting by itself would not have an impact on the country’s auto sector,” Rauf added.

“It remains to be seen what decision PSMC takes. If they decide to shut down the plant, then it would be a negative development.

“However, delisting is a negative development for PSX, as the bourse does not have large companies in the first place,” he added

In recent months, a number of companies from different sectors have announced share buybacks citing low valuations of scrips.

The PSX’s KSE-100 Index has been under pressure for years as a number of factors have discouraged investment in Pakistan’s stocks. Market capitalisation, which was once close to $100 billion, has retreated to under $26 billion now.