Dubai Islamic Bank to advise Pakistan on sale of equity in Kapco

The sale of Islamabad’s 40 per cent stake in the listed Kapco is worth an estimated $300 million, and the sale might draw foreign investors.

Dubai Islamic Bank is forging ahead with its expansion into Indonesia. Jeffrey E Biteng / The National

Dubai Islamic Bank will reportedly advise Pakistan on selling its 40 per cent stake in Kot Addu Power Company (Kapco) as the country’s economic upsurge lifted its benchmark stock market index to a record this month.

The emirate's biggest Sharia-compliant lender would lead an advisory group that includes Deloitte, Lummus Consultants International, and Mohsin Tayebaly and Company, said Pakistan's The Express Tribune newspaper.

Neither the bank nor Kapco were available for comment.

Pakistan, which has been roiled by political instability and violence for decades, has rejuvenated its economy in recent years after the IMF provided a US$6.6 billion bailout loan in 2013. That led to a string of state asset sales that have bolstered Pakistan’s foreign exchange reserves and lowered inflation.

The country, a net energy importer, is also set to gain from the collapse in oil prices and China’s $46bn investment plan to build transport infrastructure connecting the two countries.

Last week, the benchmark Karachi stock index reached a record high and the IMF predicts Pakistan’s economic growth this year at 4.7 per cent, outpacing IMF’s 3.3 per cent global growth estimate for the year.

Fahad Irfan, a research analyst at Foundation Securities in Karachi, attributed the stock market rally to the improving economy, rising foreign exchange reserves and declining oil prices.

He estimates that the sale of Islamabad’s 40 per cent stake in the listed Kapco is worth about $300 million, adding that the sale might draw foreign investors.

As oil prices have fallen more than 50 per cent over the past year, UAE banks are keen to expand their presence in emerging markets such as Pakistan and India amid signs of economic slowdown at home.

The UAE’s economy is reliant on crude oil revenues and is expected to slow this year. “I believe banks that have already established an international strategy will accelerate execution amid a likely multi-year trend of sub-$100 a barrel crude prices,” said Sanyalaksna Manibhandu, the head of research at NBAD Securities.

He said UAE lenders – such as Dubai Islamic Bank, Abu Dhabi Islamic Bank, FGB and Emirates NBD – would try to extract more profits from their overseas operations.

Dubai Islamic Bank is forging ahead with its expansion into Indonesia, where it is in talks to lift its equity in an Islamic lender to 40 per cent, as well as setting up shop in Kenya, where it will seek to tap Africa’s economic growth.

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