Government investment: relatively higher inflow from dividends estimated

The Finance Ministry has estimated a relatively higher inflow of Rs 88.122 billion from dividends on government investment for the current fiscal year in spite of divestment of government shares of four profitable state-owned entities. The government has off-loaded its holdings in Habib Bank Limited (HBL), United Bank Limited (UBL), Allied Bank Limited (ABL) and Pakistan Petroleum Limited (PPL). In calendar year 2014, HBL distributed a dividend of Rs 12 per share to its shareholders, while UBL paid Rs 11.50, ABL Rs 6.50, and PPL Rs 12.50 on each share.
The government earned Rs 78 million on dividends on government investment in HBL, Rs 30 million dividend on UBL and an estimated Rs 85 million in PPL. The government sold its entire holding of 41.5pc shares (359.3 million shares) in HBL. The process was set rolling with the sale of 241million shares (19.8%) of UBL for $387million. Later, the government disposed of 70.06 million shares (5% stake) in PPL for Rs 15.3billion. This was followed by the sale of the government''s remaining 12 million shares (11.5%) in ABL, which fetched it Rs 14.4billion.
However, analysts say that the sale of government holding shares in the banking sector and PPL would not have much impact on the government''s total dividend income because a major chunk comes from the oil and gas sector. They added that banking sector''s share is no more than Rs 200 million and the rest is from the oil and gas sector. The government has set a target of Rs 87.5 billion from non-financial institutions including Rs 32 billion from Oil and Gas Development Company Limited, Rs 17 billion from Pakistan Petroleum Limited, Pak Arab Refinery (Rs 4.5 billion), Government Holding Private Ltd (GHPL) (Rs 9 billion), SSGCL (Rs 1.5 billion) in the current fiscal year.
The government has set a target of Rs 561 million from financial institutions in current fiscal year which include National Investment Trust (Rs 70 million), National Bank of Pakistan (Rs 43 million), ABL (Rs 75 million), Pakistan Oman Investment Co (Rs 123 million), Pak Brunie Investment (Rs 150 million), Pak China Investment (Rs 25 million) and Pak Iran Joint Investment (Rs 75 million).
Research Analyst Topline Securities, Umair Naseer told Business Recorder that it has been observed that the dividends on government investment are always higher than the previous year as profits of companies are going up. The profitable companies like Oil and Gas Development Company Limited (OGDCL) and Pakistan Petroleum Limited (PPL) account for 56% of the total flow of dividends to government from state enterprises. However, he added, that it is not necessary for the target amount to be achieved as budgeted targets err on the side of optimism.