Govt invites investors to start due diligence of SME Bank

ISLAMABAD: Government on Tuesday invited two renowned financial institutions to start due diligence of state-owned SME Bank Limited, eyeing six billion rupees of investment in the bank after its privatisation expected by June-end.

Minister for Privatisation Daniyal Aziz approved the opening of data room for buy-side diligence of SME Bank Limited, as the Privatisation Commission (PC) continues to proceed ahead with the bank’s privatisation, while inviting qualified potential bidders to conduct its due diligence, the commission said in a statement.

It said the government aims “to conclude the privatisation process during the current fiscal year”.

“SME Bank (will) get Rs6 billion injection upon successful privatisation,” the commission added.

SME Bank has been incurring continuous losses since 2010, resulting in total un-appropriated losses of over Rs2.7 billion, while continuing to remain exempted from the minimum capital requirement of the State Bank of Pakistan.

SME Bank has been operating with a paid-up capital of Rs2.39 billion since 2007 as the central bank exempted the bank to meet the minimum capital requirement of Rs10 billion. Founded in 2005, the bank has a small network of 13 branches across the country.

Recently, five investors expressed interest in response to PC’s invitation for acquisition of majority shareholding of SME Bank.

Of them, three internationally-recognised financial institutions, namely FINCA Microfinance Bank, Saudi Pak Industrial and Agricultural Investment Bank and Lanka Orix Leasing Company, were prequalified after a thorough evaluation by the commission.

Lanka Orix Leasing Company, a Sri Lanka-based financial institution, withdrew from the process, citing its inability due to strict exchange control regime of Sri Lanka.

Successive governments made attempts to privatise the bank as part of efforts to divest state stakes from lose-making public sector enterprises.

But, privatisation of state-owned enterprises has always been difficult as it incites public opposition.

Last year more than 10 local and foreign investors expressed interest in acquiring up to 93.88 percent in the share capital of SME Bank after the cabinet committee on privatisation had approved the divestment proposal early last year.

The privatisation commission said previous attempts to restructure the bank also include two voluntary severance schemes (VSS) to the employees of SME Bank in 2003 and 2009, wherein more than 800 employees opted for the VSS.

“The PC intends to ensure safeguarding employees’ interest in accordance with the applicable laws,” it added.