Addressing economic and bank officials at a Cabinet meeting on Tuesday, President Hassan Rouhani said his government will continue in this direction to “involve the people in the economy, improve economic transparency and fight corruption [in state-run companies]”.
“Offering government shares in the capital market is in line with Article 44 [of the Constitution] and downsizing the government,” IRNA quoted him as saying.
Article 44 of the Constitution compartmentalizes the economy into three main parts, namely public, cooperative and the private. It obliges the government to transfer 80% of the shares in state-owned and affiliated companies to nongovernment entities.
In August, head of the Plan and Budget Organization Mohammad Baqer Nobakht said the government earned 170 trillion rials ($570 million) from share sales in state-run companies in the current fiscal year that ends next March. It was beyond the initial 119 trillion rials ($517m) projected in the 2020-21 fiscal budget.
In a report the Iranian Privatization Organization, said last month that the government had divested shares worth 272 trillion rials ($910m) in 16 state-owned companies up until August 2020. That amount was 16% of all divested government stakes since IPO’s inception in 2001.
Struggling with chronic budget deficits, the government says it will use revenue from the divestments exclusively to fund development projects.
Residue Shares
Abbas Memarnejad, the deputy economy minister for banking, insurance and state companies' affairs, said Tuesday the ministry is planning to sell the remaining sharers in three banks and two insurance companies via a second exchange-traded fund after it failed to do so via an initial ETF in May.
In May, the government offered its remaining assets in Tejarat Bank, Bank Mellat, Bank Saderat Iran, Alborz Insurance Company and Amin Reinsurance Company via the ETF.
The original value of shares held by the ETF was 170 trillion rials ($570m). However, the move failed to attract investors and the government earned 67 trillion rials ($220 million).
According to Memarnejad, the value of remaining government shares in the four entities is now 240 trillion rials ($800m) as per share prices on the bulletin board of the Tehran Stock Exchange.
It merits mention that prices of shares, particularly in giant companies in which the government has stakes, increased dramatically in the first four months of current fiscal year before entering a deep correction phase in mid-August.
The main index of TSE, TEDPIX, grew 270% in little more than four months, from 500,000 points in March to 2.2 million points in early August. In recent days, however, share prices have plunged and investors of all stripes are hunting for safe havens in the forever attractive gold and currency markets in Iran.
The government also has other plans to sell debt. The IPO Chief Alireza Saleh said earlier that 12 government-owned companies are on the waiting list to go public.
According to Saleh, IPOs for Esfarayen Industrial Complex (steel manufacturer), Opal Parsian Sangan Industrial and Mineral (OPSIM) and Omran-e-Maskan Sazan Iran, a construction company will be announced in the near future.
Last month the government sold some of its shares in four refineries via an ETF including in Tehran Oil Refining Company, Esfahan Oil Refining Company, Tabriz Oil Refining Company and Bandar Abbas Oil Refining Company.
That move too was shunned by investors as barely 20% of the shares were bought. Data show that investors bought units of the ETF worth 130 trillion rials ($433m). The government then wanted to generate 600 trillion rials ($2 billion) from the four refineries.
Plans also include the launching of an ETF for selling government shares in giant enterprises, namely 12.05% stake in the National Iranian Copper Industry Company, 17.2% in Mobarakeh Steel Company and 14.04% in Iran Khodro and 23% in SAIPA (two main domestic carmakers).