Sarmaya-e-Pakistan’s (SLP) first board meeting had Ehsan Malik unanimously elected as its chairman. The idea of a holding company is not well received in the market as seeing the six months performance of the PTI’s economic team, especially the slow hiring process, skepticism is growing.
Eight out of the eleven members are from private sector and they have been the top corporate leaders in the country, but fixing PSEs is all together a different ballgame. May luck be with the SLP, but do not expect any miracles, or any transformation in SOEs any time soon.
The first step of the board is to appoint top management - CEO, CFO and Company Secretary. There are around five hundred applications received for top management and an HR committee has been formed to shortlist the candidates and appoint appropriate people. The top management, once hired, will constitute the second layer of management. The idea is to have five pillars with relevant experienced people to be hired - the pillars include finance, energy, oil and gas, logistics and manufacturing.
If all things go as per plans, it will take around six months to hire the management of the holding company. After, that, the company will pick 8-10 out of around 200 PSEs to reform and move in bits and pieces. Till that time ‘business as usual’ within SOEs will continue - for instance PIA and PSM may continue to make losses and the government will continue to pump money to run these ailing companies.
The idea of SPL is to operate like a restructuring boutique investment bank - such as Houlihan Lokey, Lazard etc. The plan is to have the right team in the holding company than to pick up PSEs in chunks and restructure and reform them, and then recommend them for privatization or let them continue to run under government.
The idea is cherry picking - by reforming the companies with lesser problems and based on the success of these, move towards the challenging ones. Expect the better performing discos like FESCO, LESCO or IESCO along with some other companies in the initial list to be taken up first. The white elephants like PIA and PSM may come much later.
The company is open to new ideas and is not fixated to keep on running PSEs indefinitely under government. But the company is not mandated for privatization as it will only restructure and pass on the recommendation. The board has the realization that there are no quick fixes and restructuring may take time.
The company may not operate on preconceived notion that getting rid of people is the only solution. It may look for other options of restructuring. But any plan would need equity or debt injection. Private equity injection with controlling stake could be a very good option for poorly performing PSEs - such as Abraaj investment in KE, but the board thinks differently. They may like to attract debt capital for reforming company. The best bet is to have loan from ADB, and for it, the IMF letter of comfort is a prerequisite.
For example, in case of PIA, the solution is to have fleet expansion, acquire routes and improve service delivery. That would require massive investment, and turnaround time may take years after the capital injection. A quicker and easier way could have been to have private equity injection. But based on the thinking of government, the government may need a second term to turnaround the likes of PIA.
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