ISLAMABAD: Privatisation Commission (PC) is to approach Cabinet Committee on Privatisation (CCoP) for seeking guidance for retention of shares of State Life Insurance Corporation (SLIC) in Pakistan Reinsurance Company Limited (PRCL) whose shares value is the lowest in the last three years, well informed sources told Business Recorder.
The decision was taken at a meeting presided over by Finance Minister Shaukat Tarin on a proposal titled “confirmation for retention of SLIC shares in PRCL, reference to divestment of up to 20% GOP’s shares in PRCL.”
The meeting was informed that before divestment of 20% GOP shares in PRCL, shareholding structure of the company is as follows: (i) MoC/GoP- 51 % ;(ii) SLIC- 24.4 %;(iii) NBP-3.5 %; and (iv) General Public 21 %.
The Insurance Ordinance 2000 ensures business model for PRCL entailing “Right of First Refusal” whereby PRCL has a guaranteed business of 35% from other insurance companies working in Pakistan, provided GOP’s shareholding in PRCL is greater than or equal to 51%.
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According to sources, business viability of PRCL will therefore, be affected after divestment of 20% GOP shares in the company and this aspect will also significantly impact appetite of the investors. After examining this problem, the legal team of Financial Advisory Consortium (FAC) has advised that if SLIC gives confirmation to retain its 24.4% shares in PRCL, the company would continue to meet the GOP controlling ownership interest requirement for business viability.
In this regard, SLIC and MoC have been requested for confirmation, which has not yet been provided, despite several meetings held between MoC, SLIC, and PC to settle the issue.
The sources maintained that financial position of PRCL was also discussed with Chief Executive Officer (CEO) of the Company and pros and cons of the divestment of shares were closely weighed.
The meeting took into consideration that the share price is currently trading at Rs.22.98, which is near its lowest levels in 3 years. Further, amount of proceeds to be collected from divestment of 20% shares is expected to be around Rs 1.2 billion approximately while the proposed divestment will dilute the strategic shareholding of GOP which needs to be maintained for business viability of the Company.
The sources said, after consultation with the Advisor to PM on Commerce, Abdul Razak Dawood, the Finance Minister directed that a summary for CCoP may be presented by Privatisation Commission for deciding the way forward.
Copyright Business Recorder, 2022
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