Divestment of PRCL shares: PC completely ready to approve 3 pricing options

ISLAMABAD: The Privatisation Commission (PC) Board is all set to approve three pricing options for divestment of 20 per cent share of Pakistan Reinsurance Company Limited (PRCL), sources close to Commerce Advisor told Business Recorder.

The PC Board which is scheduled to meet on Tuesday (today) will approve share price ranging from Rs 20 to Rs 24.12 per share.

Sharing the details, sources said, pursuant to decision of Privatisation Commission (PC) Board of August 26, 2019 the Next Capital Limited was appointed as Consultant to the issue, Habib Bank Limited (book runner) and Haidermota & Co (legal sub-contractor as Financial Advisors for the divestment of up to 20 per cent shares of Pakistan Reinsurance Company Limited (PRCL) held by the Government of Pakistan (GoP).

The Cabinet Committee on Privatisation (CCoP) on August 1, 2020 approved the transaction structure for divestment of up to 20 per cent share of PRCL. The CCoP decision was ratified by the Federal Cabinet on September 01, 2020. The Offer For Sale Document (OFSD) has been approved by Pakistan Stock Exchange (PSE) for publication purpose which has also been approved by Securities and Exchange Commission of Pakistan (SECP) subject to payment of prescribed fee.

The FA conducted entire process of share price valuation, including PRCL’s historical performance (three months, six months, nine months and 12 months) as compared to its peers. Further, its valuation methods, including peer multiplies, precedent transactions, discounted cash flow and dividend discount model were also considered with the prime focus on domestic comparables, precedent SPOs conducted by GoP and dividend yield and alternate model of market conditions.

In light of the valuation analysis, investment theme and other market-based factors, FA has proposed a Floor Price of Rs 20 / share.

After deliberations the Transaction Committee during the meeting held a few days ago, approved to present following pricing options to the PC Board for consideration: (i) Rs 20/ share based on domestic comparables, precedent SPOs by dividend yields and market conditions ;(ii) Rs 22/ share based on discount factor of 8.78 per cent to the prevailing three months value weighted average price of PRCL (as of September 14, 2021, (Rs 24.12/ share); and (iii) Rs 24/ share subject to GoP commitment of declaring dividends of Profits After Tax (PAT) for the next three consecutive years.

The Board also accorded approval for hiring financial advisor of Sindh Engineering Limited (SEL), besides discussing implementation status of decisions of previous Board meetings.

Copyright Business Recorder, 2021