Divestment of Two Main Car Companies Not Possible Now

EghtesadOnline: Head of the Iranian Privatization Organization says government shares in the two main auto companies are held as collateral with banks posing a challenge to their divestment.

News ID: ۷۸۷۸۱۱

12 April 2022

“Iran Khodro [IKCO] and SAIPA have put government shares as collateral to borrow from banks,” Hossein Qorbanzadeh said on the sidelines of a meeting with private sector leaders on Monday.

“The loans have not been repaid. Under the existing conditions it is not possible for the IPO to sell the government stakes in the two companies unless the collateral is released,” IRIB News quoted him as saying.

He did not elaborate. It was not clear how much the loss-making car companies have borrowed or if and when they intend to repay. Local media has often carried reports by economists and experts about mismanagement of the two top carmakers infamous for inferior quality and high prices.

The government holds 5% and 17% stake in Iran Khodro and SAIPA, respectively, which are among the golden shares of the companies.

A golden share gives the shareholder veto power over changes to the company's charter. It has special voting rights, giving its holder the ability to block another shareholder from taking more than a ratio of ordinary shares.

Qorbanzadeh said the IPO has made preliminary preparations for offering the shares in the bourse but it is the Industry Ministry that is responsible for releasing the collateral.

“We are ready to fully privatize the two carmakers before

September if the obstacles are removed.”

Governments have said for long that they want to fully privatize some big companies but have apparently faced a multitude of challenges. The few that have been sold and privatized have encountered problems, namely managerial issues, financial constraints and opposition by workers.

National Iranian Copper Industry Company and Mobarakeh Steel Company are other big names in which the government has shares.

Government income forecast from selling stakes in listed companies has been cut drastically in the 2022-23 fiscal budget.

As stipulated in the budget law, the government expects to generate 710 trillion rials ($2.6 billion) from selling shares in several listed companies by March 2023.

This is 25% or 240 trillion rials ($800 million) less than the revenue projected last year apparently because of the poor performance of the government in realizing earlier privatization targets.

On the divestment list are big names such as Pars Agro-Industry & Animal Husbandry Company, Esfarayen Industrial Complex, Wood, Metal, Plastic and Electronic Industrial Complex (Sima Choob), South Aluminum Corporation (SALCO), Hegmataneh Petrochemical Compnay, Shahid Abbaspoor Dam & Power Plant Operation & Generation Company, Yazd Meat Company and Iranian Catalyst Development Company.