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ISLAMABAD: The privatisation process of Pakistan Steel Mills (PSM) is reportedly hanging in the balance due to "controversial" valuation of its assets by two firms and now a third valuation is expected to be conducted, well informed sources told Business Recorder.

Sharing the details, sources said observations of Financial Advisors (FA) are that the valuation of assets made by PSMC's subsidiary under scheme of arrangement for privatisation is not privatise-able and market-able due to high valuation of assets made by M/s Joseph Lobo for PSMC.

The FA has informed the Ministry of Industries and Production (MOI&P) and Privatisation Commission (PC) that he has suggested liquidation of the assets at the value assumed by M/s Joseph Lobo instead of developing the stages for privatisation by which majority of the shares have been approved to be privatised by CCoP and ratified by the subsequent forum.

According to sources, the attempt was made by PC by sending Iftikhar Naqvi DG PC along with financial consultant Asad Rasool of Transaction Committee on PSMC Karachi to negotiate the valuation made by M/s Joseph Lobo. Iftikhar Naqvi is also the focal person given the assignment of privatisation of PSMC.

The team of Transaction Committee on PSMC had held a meeting with M/s Lobo and PSMC management accompanied by official of MOI&P.

The Transaction Committee on PSMC was also aware of this development as the claimed overvalued assets of PSMC by M/s Lobo for PSMC were also discussed in the Transaction Committee meetings on PSMC.

Insiders in PSM and Convener Chairman Stakeholders Group, Mumrez Khan has confirmed repeatedly to this correspondent that influencing the PSMC valuation by officials of PC and members of Transaction Committee on PSMC is illegal and unmethodical and raises questions as to why efforts are being made to reduce value of PSM assets and to benefit for whom?

Experts conversant with the anti-graft law and SECP regulations argue that valuation of assets approved by external auditors of PSMC and endorsed by Board of Directors of PSMC together with entered valuation in books for the subsidiary to be privatised cannot be interfered or influenced with, and if this happens it is a questionable offence for cognizance.

The experts further said that the intent and not succeeding of the intent for bad cause are both equally penal-able. The bad intent with motivated interests is equally bad in law, if the same has not succeeded to some gain otherwise not lawful.

The valuation of assets made by M/s Joseph Lobo is about Rs100 billion for plant and machinery and the factory building on the land allocated to subsidiary is valued at about Rs30 billion, which values have been incorporated in the financial statements for end Dec 2020.

Meanwhile another valuation by M/s Iqbal Nanji was presented to the Transaction Committee on PSMC, which was opposed by PSMC as only on the value of factory building the valuation difference is three times with the valuation made by M/s Joseph Lobo for PSMC and M/s Iqbal Nanji for FA. PSMC also opposed the value of land as against value per acre determined by M/s Joseph Lobo.

The Transaction Committee reportedly made presentation to Prime Minister, Imran Khan and Finance Minister, Shaukat Tarin that the valuation made by PSMC cannot become a benchmark for generating any interest by investors to buy atleast 51 percent share as approved by CCoP and ratified by Cabinet.

The sources maintained that the third valuation is going to be done by and through PC and FA in order to dispute the valuation made by PSMC, which has become part of financial statement of Dec 31, 2020.

Copyright Business Recorder, 2021

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