Pak Suzuki Motor Company (PSMC) has announced its intention to review and consider the majority shareholder's proposal to purchase all outstanding shares of the company and subsequently delist from the Pakistan Stock Exchange (PSX). This significant move, which falls under Rule 5.14.1 of the listing regulations, was communicated to the PSX in a formal notice.
The decision to delist implies that the company may find compliance costs associated with remaining listed on the stock exchange to be high. Fahad Rauf, Head of Research at Ismail Iqbal Securities Limited, commented on this development, suggesting that Pak Suzuki likely believes its shares are undervalued in the market, motivating their intent to repurchase them.
The announcement had an immediate impact on the company's share price, with the stock hitting its upper limit during trading on the day of the announcement. Pak Suzuki has been facing various challenges, including decreased sales and high finance costs, resulting in losses of approximately Rs9.68 billion in the first six months of FY2022-23. The company had previously announced shutdowns of both its vehicle and motorcycle plants in Pakistan.
These losses are not surprising in the context of Pakistan's auto sector, which has been grappling with challenges such as high energy costs, political instability, and difficulties securing letters of credit for imports due to a severe dollar shortage.
While the delisting itself may not directly impact the country's auto sector, the ultimate decision taken by PSMC regarding its plants and operations will be closely watched. A shutdown of the plants would be viewed as a negative development for the sector. Nevertheless, the delisting decision holds significance for the PSX, as it currently lacks large companies, and the KSE-100 Index has been under pressure for an extended period due to factors discouraging investment in Pakistan's stocks.
The PSX's market capitalization, which once approached $100 billion, has now declined to under $26 billion. This reflects the broader challenges and uncertainties faced by Pakistan's economy and stock market, making it a topic of interest for investors, analysts, and stakeholders in the business and financial news sectors.
