Suzuki Motor plans to acquire fullstake in Pak Suzuki, de-list from PSX

KARACHI: Pak Suzuki Motor Co Ltd, Pakistan’s biggest carmaker, said on Thursday it will consider a proposal by its parent company Suzuki Motor Corp to buy out its minority shareholders and de-list from the Pakistan Stock Exchange (PSX).

The company said in a notice to the PSX that its board of directors will meet on Oct. 19 to discuss the proposal. “This is to inform you that a meeting of the Board of Directors of PSMC, will be held on Thursday, 19 October 2023 to review and consider the majority shareholder’s intents to purchase all outstanding shares of Pak Suzuki Motor Company Limited held by other shareholders and de-listing under Rule 5.14.1. of the listing regulations,” read a notice to the PSX. "The decision taken by the board shall be communicated after the board meeting."

The announcement sent the company's share price up to Rs146.20 on Thursday, a 5 percent increase as the move indicates a major shift in the company’s ownership structure. Analysts said the decision to de-list and buy back all minority shares reflects the majority shareholder’s intention to gain full control and influence over the company’s future direction. This move is expected to bring significant changes to the dynamics and governance of PSMC and have a potential impact on the automotive sector in Pakistan, they added.

The move comes as Pak Suzuki faces a slump in sales, high costs and currency volatility in Pakistan, where it has been operating since 1983. The company reported a net loss of 9.68 billion rupees ($58 million) for the first half of the fiscal year that started in July, compared with a profit of 1.15 billion rupees a year earlier.

The company attributed the loss to lower sales volume, higher finance cost, the depreciation of the rupee and the increase in energy prices. The company is facing stiff competition from new entrants in Pakistan’s auto market, such as Hyundai Motor Co and Kia Motors Corp, which have launched new models with lower prices and better features.

Pak Suzuki also announced several shutdowns of its vehicle and motorcycle plants in Pakistan during the year due to low demand and supply chain issues. The decision, however did not surprise analysts as the auto sector has been facing challenges on several fronts, including high energy costs, political instability, and an inability to secure letters of credit for imports amid a severe dollar shortage.

Car sales fell 30 percent year-on-year in September to 6,410 units in September. For the first quarter of the fiscal year 2023/24, passenger car sales dropped 44 percent to 16,021 units, compared with 28,571 units in the same period last year.

Analysts said the decision to de-list reflects the company's lack of confidence in the prospects of the Pakistani market and the benefits of being listed on the PSX.

"The decision to de-list suggests that the company is not seeing an incentive to remain listed at the bourse as compliance cost is high," Fahad Rauf, head of research at Ismail Iqbal Securities Limited, said. The company likely believes its shares are available at a cheap valuation so they are intending to buy it."

Rauf said the de-listing would not have a significant impact on the country's auto sector, unless the company decides to shut down its operations in Pakistan. "However, de-listing is a negative development for PSX, as the bourse does not have large companies in the first place." The PSX has seen a number of companies from different sectors opting for share buybacks and de-listing in recent months, citing low valuations and poor market conditions.