Accordingly, a new ETF, dubbed as “Iranian Refinery Industry Investment Fund” will be created to offer the residue of government shares in six refineries.
The refineries on sale include a 20% stakes in Tehran Oil Refining Company, Lavan Oil Refining Company, Shiraz Oil Refinery Company, Isfahan Oil Refinery, Tabriz Oil Refinery Company, Bandar Abbas Oil Refining Company, Fars news agency reported.
This comes after earlier government schemes tried but failed to offer its remaining shares via Tehran Stock Exchange and the over-the-counter market Iran Fara Bourse, according to Financial Tribune.
The government has reportedly considered discounts in the new scheme to attract buyers. Pricing will be based on average final price of shares displayed on TSE and IFB bulletin boards during a calendar month to the day prior to the subscription date. Prices will be subject to up to 20% discount.
This includes a 1.5% discount during the subscription phase and a 5% discount when the fund purchases shares from the government.
There is also a 14% discount for real entity buyers who want to invest in the refinery ETF. As per a decision by the High Council of Securities and Exchange, each buyer can purchase 220 units of ETF worth 20 million rials ($153).
An ETF is a type of security that involves a collection of securities—such as stocks—that often tracks an underlying index, although they can invest in any number of industry sectors (shares, stocks, bonds, oil futures, gold bullion and foreign currency) or use various strategies.
ETFs are listed on exchanges and ETF shares trade throughout the day just like ordinary stock.
As per the divestiture committee’s decision, the National Iranian Oil Refining and Distribution Company as the main founder of the ETF will cooperate with the Securities and Exchange Organization and Iranian Privatization Organization of Iran to set up the fund.
Futile Attempts
In the past, the government made several attempts to sell its shares in several specified companies, including six refineries. However, there were no buyers apparently due to snags in the divestiture systems.
The government had earlier offered shares in blocks of millions of dollars each and required investors to buy the blocks.
The idea to tap ETF capacity was earlier backed by the PBO as part of a broader package to help government cope with its high spending lists and plug deep holes in its budgets.
PBO hailed the role of ETFs as it lets the government undertake management of ETF portfolios, and in turn, maintain control of the holdings.
The scheme is incorporated in the draft budget for the next fiscal year (March 2020-21) which government Majlis earlier in the month.
As per the draft budget, companies and organizations are obliged to name subsidiaries in which the government’s share is below 50%.
They are required to also send the names of companies to the Ministry of Economy and Plan and Budget Organization by June 2020.
Apart from the six refineries, the government is expected to use ETFs to offer its remaining shares in twelve other companies, including, 17% in Tejarat Bank and Bank Mellat each, 18.3% Bank Saderat Iran, 17.34% Alborz Insurance Company and 11.44% in Amin Reinsurance Company.
Added to the list are 18.96% share in Persian Gulf Petrochemical Industries Company, 12.05% in National Iranian Copper Industry Company, 17.2% in Mobarakeh Steel Company, 14.04% in Iran Khodro (IKCO), 23% in SAIPA, 40% in Pars National Agro-Industry and Animal Husbandry Company and 13.02% in the National Investment Company of Iran.