The government expects to make 170 trillion rials ($1 billion) by divesting its first phase of shares through an exchange-traded fund that holds government stakes in three banks and two insurance companies.
“Income from selling shares via the ETF will be used solely for completing development projects and not for current (gov’t) expenditures,” Abbas Memarnejad, deputy economy minister for banking, insurance, and state-owned companies' affairs was quoted as saying by IRNA. He did not name the projects.
Of this amount, 160 trillion rials will be spent on development projects and the rest will be deposited in a special fund for asset management and marketing.
As per provisions of the budget law, the government should spend up to 700 trillion rials ($4 billion) of its earnings on completing development projects.
Head of the Public and Budget Organization Mohammad Baqer Nobakht had said earlier that funding for development projects will be sourced mainly through oil revenues.
However, the sharp decline in international crude prices and restrictions on the Iran’s oil export has made it difficult for the government to finance development projects many of which have been put on hold
3-Phase Plan
The government has launched a comprehensive plan for downsizing and divesting its shares in 18 companies via three ETFs.
The first phase of the plan commenced on May 3 with 17% of government stake in Tejarat Bank, 17% in Bank Mellat, 18.32% in Bank Saderat Iran, 17.34% in Alborz Insurance Company and 11.44% in Amin Reinsurance Company on offer via an ETF dubbed the ‘First Financial Intermediary’.
The government has given prospective buyers until May 20 to subscribe for the ETF units. Buyers are barred from trading units on the stock market within two months after the subscription period expires.
There are two other ETFs for offering shares in automotive companies and refineries in later stages.
As per a timeline announced by the government, in the next stage government stakes in four refineries will be put up on June 21.
Those shares will include 20% stakes in Tehran Oil Refining Company, Isfahan Oil Refinery, Tabriz Oil Refinery Company and
Third phase of the program will in the second half of current fiscal year (September 22) and will include shares in giant auto and metal companies.
The fund is expected to hold 12.05% of government stakes in the National Iranian Copper Industry Company, 17.2% in Mobarakeh Steel Company, 14.04% in Iran Khodro (IKCO) and 23% in SAIPA.
As per rules, having a trading code is not obligatory in the subscription stage and the general public can buy ETF units using national IDs as trading codes. However, they have to receive a trading code later for offering their ETF units in the stock market.