KARACHI: The Pakistan Stock Exchange (PSX) announced the transformation of its real estate business into a wholly owned subsidiary (PropCo) and the transfer of real estate properties from PSX and related arrangements to the newly formed company. In return, PropCo will issue all of its shares in favor of the stock exchange.
According to the latest valuation carried out by Iqbal A Nanjee and Company (Private) Limited, as of June 30, 2020, the fair value of property, plant and equipment and investment property to be cut up was 4.737 billion rupees.
The valuation was carried out in accordance with the commercial rates for the sale of office space in force on the market. However, under IFRS-05, the property is held at the lower of cost or fair value less costs to sell.
“In line with the previous PSX announcements dated February 23, 2018 and August 28, 2019, regarding the approval in principle of the PSX board of directors regarding the proposed split of PSX real estate from its operations, the board resolved to form a wholly owned subsidiary of PSX for the purpose of the spin-off, instead of creating a sister company owned by shareholders of PSX, ”the exchange noted in a notice published Wednesday.
One official said the subsidiary would maximize returns on real estate assets, which currently generate negligible income.
Ahmed Chinoy, director of the board of directors of PSX, said the exchange will now seek approval from the Securities and Exchange Commission of Pakistan (SECP), as well as approval at the annual general meeting.
“At present, the value of the assets to be transferred is 4.7 billion rupees; however, after the required approvals, there would be a revaluation of the assets.
“It would be a subsidiary and PSX could consider listing it on the stock exchange in the future, but for now all future plans are dependent on SECP and other required approvals,” Chinoy added.
PSX paid 10 per cent of the offer amount of Rs 32.99 million to Pakistan Railways during the fiscal year ended June 30, 1993, as a deposit against the purchase of land. However, following the initiation of certain legal proceedings by one of the bidders, no other action for the purchase of land could take place.
Subsequently, Pakistan Railways canceled the sale of railway land to the PSX (the old Karachi Stock Exchange) and requested the company to seek reimbursement of the aforementioned amount. The Sindh High Court dismissed the action on the merits, which was filed by the aforementioned bidder.
During the fiscal year ended June 30, 2002, on the basis of the legal opinion obtained, PSX filed a counter-action against Pakistan Railways for the specific execution of the agreement which, if decided in favor of the PSX, may require the company to purchase the land and pay the balance of the purchase consideration, amounting to Rs 296.995 million. The said case is pending before the High Court of Sindh.