Shareholder Challenges Delisting Price of Pak Suzuki

Pak Suzuki Motors, one of the leading automobile assemblers in Pakistan, is facing a legal challenge from a minority shareholder over its proposed delisting from the Pakistan Stock Exchange (PSX).

Nadeem Nisar, who owns 10% of the company’s shares, has written a formal letter to the PSX authorities, the Securities and Exchange Commission of Pakistan (SECP), and the Chairman of Pak Suzuki, contesting the delisting price determined by EFG Hermes, an independent valuation firm. Nisar claimed that the delisting price of Rs 609 per share is grossly incorrect and does not reflect the fair market value of the company “when tested with foreign and local standards.” His letter to the PSX reads:

“The independent delisting price markedly deviates from the discerned fair market value. The evaluated independent valuation merely adopted preferred income return trends; disregarding its peers in terms of fair values.”

Bear in mind Nadeem Nisar is the son of famous trader Nisar Dunka who actively traded and held stocks during the 90s. On 12th January 2024, a letter was sent by Nadeem Nisar to PSX, stating that he had accumulated more than 10% of the shareholding of Suzuki and that he had crossed the 10% threshold. In essence, it was an announcement by the individual that he had the power to cancel the buyback by not selling any part of his shareholding to Suzuki.

Nisar cited various metrics and reports to support his claim, such as the fair price based on EPS of the last three diluted MNCs, which is around Rs 1217-28 per share, and the fair price based on comparable transactions, which ranges from Rs 925 to Rs 874 per share. However, existing disparities cast significant doubt on valuation methodologies potentially leading to under-value over-pricing in Pakistan’s market, he added. Nisar went on to mention in his letter:

“Recent favorable developments, including a substantial increase in earnings per share (EPS) – 33.38% April to June as Rs 24.44 from Rs 18.32 September 2023 – showcase the buoyant institutional support for Pak Suzuki Motors due to the factor complementing its profitability.”

Nadeem also raised concerns over the delisting process, alleging that it is marred by procedural and fiscal improprieties, financial mismanagement, and disenfranchisement of minority shareholders. He accused the company’s management of withholding critical information and documents from the shareholders, and of manipulating the shareholding pattern to favor the delisting.

He requested the PSX and the SECP to conduct a thorough investigation into the delisting process and to initiate an equitable outcome for all shareholders, which may require a revision of the delisting price. He expresses his trust in the regulatory bodies to safeguard the shareholder interests and uphold the principles of market integrity and fairness.

Pak Suzuki Motors, which is a subsidiary of Suzuki Motor Corporation of Japan, announced its intention to voluntarily delist from the PSX in December 2023. The company held a Voluntary Delisting Vote (VDV) on January 15, 2024, in which the majority of the shareholders approved the delisting proposal. The company also convened an Extraordinary General Meeting (EGM) on February 9, 2024, to finalize the delisting process.

However, the company has not yet responded to Nisar’s challenge to the delisting. The PSX and the SECP have also not issued any official statement on the matter.

Source: Pakistan Today