KARACHI, Oct 9: The final ritual of phasing out of the 40 years old Investment Corporation of Pakistan (ICP) is being held on Tuesday when its investment portfolio of more than Rs2 billion of listed and unlisted shares will be distributed and auctioned among its shareholders — banks and insurance companies.

Much to the dismay of a small number of left over staff — hardly 50 in all - the ICP that declared a profit of Rs481 million for the year 2005-06 is being merged with almost insolvent Industrial Development Bank of Pakistan (IDBP) that has accumulated a loss of about Rs27 billion and carry a negative equity.

The 40th annual report of the ICP for the year 2005-06 reveals the intention of the State Bank of Pakistan to merge ICP with the IDBP. The ICP Board held its meeting last week of August to decide that the investment portfolio of ICP having liquid shares of more than 100,000 shares per company be distributed in specie among the shareholders in proportion to their shareholding.

It was also decided that all other shares in the portfolio would be auctioned among the shareholders of ICP and cash so received to be included in final distribution before the merger of ICP into IDBP. The 40th annual general meeting on September 23 endorsed this decision.

“No public notice is necessary for this auction of ICP investment portfolio shares,” a well-placed source in the ICP explained on Monday by telephone as according to him the auction of shares is restricted among the shareholders only.

The banks and DFIs hold 85.59 per cent of the ICP shares followed by 14.32 per cent by three insurance companies. With 22.99 shareholding, the UBL is the single largest shareholder of the ICP followed by HBL 19.96 per cent, NBP 19.89 per cent, MCB 12.49 per cent, ABL 4.99 per cent, IDBP 2 per cent, Standard Chartered Bank 1.59 per cent, Citibank 0.40 per cent, NIT 0.76 per cent, Union Bank 0.40 per cent, Pakistan government 0.12 per cent. The State Life Insurance Corporation has 11.49 per cent stake in the ICP followed by 2.50 per cent of Pakistan Reinsurance.

The ICP’s investment portfolio includes shares acquired through underwriting take ups, shares purchased from the market and investment in government securities besides placement in bank deposits.

The investment portfolio provided about 80 per cent capital gains and 20 per cent dividend income. The total holdings of quoted, unquoted shares, government bonds COIs stood at Rs2.18 billion at market value as against cost of Rs1.42 billion.

The biggest investment of Rs254.37 million is in oil and gas followed by Rs228.92 million in the government securities.

Established in 1966, the ICP broadened the base of investment and contributed in development of capital market. It was a source of income for thousands of middle income group who participated in Sharing Accounts Scheme and subscribed to its 26 open ended mutual funds. One of its funds was State Enterprises Mutual Fund.

These funds were clubbed into three separate lots and were divested to two major financial operators — PICIC and ABAMCO — in the year 2002 when the stock market was hard pressed under the impact of 9/11 event.

The privatisation of the leftover ICP with an attractive investment portfolio passed through various stages. The Privatisation Commission wanted to privatise it under its supervision. Certain legal and technical hitches, there were never made public, hindered this divesture and eventually the State Bank of Pakistan took up the responsibility.

Under the SBP guidance, the ICP board decided on August 8 to distribute its investment portfolio that was approved by its 40th annual general meeting in September.

The last ritual of distribution and auction of investment portfolio will be held on Tuesday to pave way for ICP’s merger with the IDBP. The ICP will bring with it a small receivable amount of loan for the IDBP which has already been found wanting of satisfactory performance in almost every department by the SBP inspectors.

“Let’s wait for the day when two government institutions that served the private sector and enriched many of them die at their hands because of default loans,” remarked an employee of the ICP.

The last annual report reveals loan write offs of more than Rs27 million against eight companies that include a small amount against a well known NWFP family.