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IPO: Biggest Government Privatization Bid Flops

The total value of public assets put up for sale was 90 trillion rials (about $2 billion), but only 560.3 billion rials ($11.6 million) of which were bought by private bidders
Biggest Government  Privatization Bid Flops Biggest Government  Privatization Bid Flops
Years of state control over the economy have made the private sector take a backseat and incapable of taking bold risks for rejuvenating floundering businesses

Iran’s largest privatization attempt in the current fiscal year (started March 21, 2017) kicked off on March 12 with less than a percent of the offered assets finding buyers.

According to Jafar Sobhani, an advisor to the head of Iranian Privatization Organization, the total value of public assets put up for sale was 90 trillion rials (about $2 billion).

This is while only 560.3 billion rials ($11.6 million) of the assets were bought by private bidders, IRNA reported.

Buyers had until March 11 to submit their offers to IPO and the organization has yet to announce a date for a new auction.

Sobhani noted that shares in Moghan Agro, Industry & Livestock Company and most of the power plants put up for sale were unable to attract any bids “due to their high price”.

“We had negotiated with potential buyers for these assets right before the auction. However, it seems they were unable to gather the required documents and collateral in time to attend the auction,” he added.

Kermanshah Industrial Estates Corporation, a slaughterhouse in Isfahan, three gas stations in Isfahan as well as one in Mazandaran Province were the only assets successfully sold. The total bid value on them reached 670.69 billion rials ($14.9 million).

Evidently, gas stations were high in demand, yet none of the stations located in Tehran could attract any bids.

One can safely say that none of the heavyweight offerings found any buyer. This should come as no surprise, as most of the government assets offered are either underperforming or simply running at losses. Years of state control over the economy have made the private sector take a backseat and incapable of taking bold risks for rejuvenating floundering businesses.

The government sold 4.54 trillion rials ($98.27 million) worth of public companies’ shares to the private sector in the first 10 months of the current fiscal year (March 21-Jan. 20), Mehr News Agency reported.

About 3.95 trillion rials ($86.3 million) of the total figure were sold via tenders, while 102 billion rials ($2.28 million) were privatized on the capital market.

Iran Privatization Organization listed 337 public companies for their shares to be transferred in the ongoing fiscal year, out of which the ownership of 230 public entities was to be fully transferred to private owners. 

The remaining 107 public enterprises were to see 80% of their shares transferred while 20% were to remain in the hands of the state.

 

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