PGPIC Divestment Falls Flat

EghtesadOnline: The government’s plan to sell its shares in the Persian Gulf Petrochemical Industries Company (PGPIC) fell flat as buyers failed to provide robust guarantees, head of the Iranian Privatization Organization said.

News ID: ۷۸۷۵۹۹

10 January 2022

“Guarantees provided by buyers fell short and in some cases they did not offer any guarantee,” Hossein Qorbanzadeh was quoted as saying by the IPO website.

The IPO last week offered three blocks of shares including two small blocks comprising 1% and 2% and one holding 15% of the government’s stake.

The PGPIC is estimated to be worth 3,500 trillion rials ($12.9 billion) and the government holds 18% of shares in the giant petrochemical company.

Qorbanzadeh added that neither the IPO’s taskforce in charge of the qualification of the potential buyers nor supervisory officials at the Securities and Exchange Organization found the buyers qualified enough.

He said the IPO will repeat the auction for selling the three blocks in the coming weeks, but did not say when.

Block trade typically involves a large numbers of equities or bonds being traded at an arranged price between two parties. They are sometimes done outside of open market to lessen the impact on the stock’s price.

According to the official, potential buyers of 15% block can have a seat on the company board giving them a voting right. Natural entities can rarely afford to buy the costly blocks of shares.

The big block comprises 43.05 million shares worth 557.5 trillion rials ($1.9b) and potential buyers can reimburse 70% of the payment in 6-month installments over for four years and pay 30% in cash.

“Given the high price of the cash payment, only institutional buyers in the petrochemical industry are normally among the main stockholders,” Qorbanzadeh said.

PGPIC is the biggest consortium of Iranian petrochemical producers. With a market capitalization worth 3,105 trillion rials ($10.9b), the giant company is the largest of its kind listed with the Tehran Stock Exchange. It is the second largest petrochemical company in the Middle East.

The divestment comes on the heels of government efforts to realize at least a segment of projected revenue from divestments in the current fiscal year that ends in March.

The government expects to make 940 trillion rials ($3.4b) from divestments this year. Out of this amount, it has reportedly generated only 7.02 trillion rials ($25 million) so far.