ISLAMABAD (March 30 2007): The federal government has shelved the long-awaited Initial Public Offering (IPO) plan of Pakistan Steel Mills (PSM) until its unbundling and completion of essential repairs, official sources told Business Recorder here on Thursday.

The decision was taken a couple of days ago at an inter-ministerial meeting under the chairmanship of Mahmood Nawaz Shah, member Privatisation Commission (PC) board which was also attended by Joint Secretary Industries Ministry, Arifa Saboohi, Director General I&T PC, Javaid Ali Khan and Consultant PC, Engineer Zahid Aziz.

The sources said, the industries ministry's representative told the meeting that the PSM had earned profit of Rs 90 million till December 2006 against the projection of Rs 1.5 billion for the current fiscal with an estimated 85 percent capacity utilisation.

According to the PSM parent ministry, the Earning Per Share (EPS) is estimated at Rs 0.82. Mahmood Nawaz Shah, member PC board, in his comments said that IPO of any company observes transparency as the figures are made publicly and the management is accountable as far as performance is concerned.

The sources said the committee debated in detail whether PSM transaction should be initiated through IPO or direct strategic sale but there were divergent views on the proposal.

However, the committee felt that in order to carry out IPO, there are certain prerequisites which need to be fulfilled one of which is unbundling of assets which needs to be completed with the similar fashion as was done in case of strategic sale, the sources maintained.

Arifa Saboohi, highlighted the complexities in un-bundling the assets saying the time required to resolve thorny issues cannot be predicted. He advised the committee not to take any hasty decision and wait for a few months when the plant is in good shape after essential and critical repairs, the sources continued. During the discussion, the committee observed that to consider IPO, it is important to analyse the value of the company.

It will be necessary to take into account the essential repairs for which an amount of Rs 4.5 billion has been approved by the Ministry of Industries and Production and is likely to be completed in 20-22 months.

The representative of the industries ministry was of the view that the future profitability and production is not predictable at this stage. Similarly, the valuation of the shares may be difficult to estimate.

Keeping in view the pending issues, the committee decided that IPO might be considered after the completion of all the requirements including un-bundling and essential repairs, as it is not feasible at this juncture.

The government has now chosen the same path for this transaction, which was proposed by the former PSM chairman Abdul Qayyum but at that stage his advice was rejected. The federal government has already filed a review appeal with the Supreme Court of Pakistan against PMS privatisation.

The process was declared null and void and Chief Justice Iftikhar Muhammad Chaudhary's removal is said to be one of the major reasons of tension between the government and the Chief Justice.

Copyright Business Recorder, 2007