Pak Suzuki Motor Company (PSMC) has formally announced its intention to review a proposal from its majority shareholder regarding the purchase of all outstanding shares of the company. This move, guided by Rule 5.14.1 of the listing regulations, signifies PSMC’s consideration of delisting from the Pakistan Stock Exchange (PSX). The announcement was made through an official notice to the PSX.
The decision to pursue delisting suggests that PSMC may perceive the costs associated with continued listing on the stock exchange to be burdensome. Fahad Rauf, Head of Research at Ismail Iqbal Securities Limited, offered insights into this development, speculating that PSMC might believe that its shares are undervalued in the market, motivating the move to repurchase them.
This announcement swiftly impacted the company’s share price, with the stock reaching its upper limit on the day of the disclosure. It’s worth noting that PSMC has encountered a series of challenges, including declining sales and elevated finance costs, resulting in losses of approximately Rs9.68 billion during the first half of FY2022-23. The company had previously announced temporary shutdowns of both its vehicle and motorcycle plants in Pakistan.
These losses mirror the broader issues experienced within Pakistan’s auto sector. The industry has grappled with challenges such as soaring energy expenses, political instability, and difficulties securing letters of credit for imports due to a severe dollar shortage.
While the decision to delist may not have a direct impact on Pakistan’s auto sector, the ultimate verdict made by PSMC regarding its plants and operations will be closely monitored. A potential shutdown of these facilities would be viewed as a negative development for the sector. However, the delisting decision carries substantial weight for the PSX. The exchange currently lacks substantial companies, and the KSE-100 Index has faced prolonged pressure due to factors that have hindered investment in Pakistan’s stocks.
The PSX’s market capitalization, once approaching $100 billion, has dwindled to under $26 billion. This decline reflects the broader challenges and uncertainties confronting Pakistan’s economy and stock market, making it a subject of significant interest for investors, analysts, and stakeholders in the business and financial sectors.
