Aga Khan’s fund intends to acquire additional shares of HBL worth over Rs3.5bn

Habib Bank Limited, one of Pakistan’s largest banks, announced on Tuesday that one of its key sponsors – the Aga Khan Fund for Economic Development (AKFED) – has expressed its intention to purchase additional shares of the bank amounting to Rs3.5 billion from the open market.

The development was shared by HBL in a filing to the Pakistan Stock Exchange (PSX).

“Aga Khan Fund for Economic Development (AKFED) has informed Habib Bank Limited (HBL) vide its letter dated May 1, 2023, of its intention to acquire additional shares of HBL from the open market, by utilizing the accumulated dividends that have not been repatriated, amounting to Rs3,534,747,825,” read the notice.

“The said purchase of HBL shares shall be in accordance with applicable regulatory approvals,” added the notice.

The Aga Khan Fund for Economic Development SA is a Swiss for-profit entity and international development finance institution which invests in countries of East Africa, West Africa, Central Asia, and South Asia.

“The move comes as State Bank of Pakistan (SBP) does not allow repatriation of dividends due to low level of Foreign Exchange reserves, we think,” said Topline Research, a brokerage firm in a note.

“However, the regulator allows funds to be used within Pakistan to avoid net outflow of US Dollars,” it added.

Foreign exchange reserves held by the State Bank of Pakistan (SBP) stand at a critical level at around a month of import cover, prompting the government to impose curbs on dollar outflow.

The reserves held by the central bank increased by $30 million, clocking in at $4.46 billion as of April 21, data showed on Thursday.

The share price of HBL hit its upper lock, closing at Rs77.94 for an increase of Rs5.43 or 7.5% on Tuesday.

“The said transaction is expected to increase holding of the AKFED to -54% (assuming today’s price of PKR 77.94) from current 51%, translating into -45mn additional shares,” said Arif Habib Limited (AHL) in a note.

HBL posted a record quarterly earning in January-March quarter with a profit before tax (PBT) of Rs21.5 billion, 47% higher than the PBT of Rs14.6 billion last year, read a press release.

Lucky Cement announces another buyback

In a separate development, Lucky Cement announced another buyback of 23.8 million shares, constituting up to approximately 7.59% of the current issued and paid-up share capital.

“Post cancellation of these shares, the company’s shares will settle at 289.6 million, aiding earnings per share by 10%,” said AHL

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The purchase period shall be from June 2, 2023 to November 20, 2023, or till such date that the buyback is completed, whichever is earlier. “The buyback will be made from the company’s distributable profits,” said Lucky.

It is pertinent to mention that Lucky completed its first buyback of 10 million shares at an average price of Rs435.6 per share in March 2023.

Many companies considering low valuation are aggressively buying their own shares. Companies including Maple Leaf Cement, JDW Sugar Mills, Bank Alfalah, Kohat Cement, Kohinoor Textile Mills, NetSol Technologies, Synthetic Products, etc have already done or announced share buybacks.