FFC keen in acquiring stake in PIA

Business Recorder

16-06-2025

KARACHI: In a significant development for Pakistan's corporate and aviation sectors, Fauji Fertilizer Company Limited (FFC) has formally announced its intention to explore a potential acquisition of stakes in Pakistan International Airlines Corporation Limited (PIACL), the country's national flag carrier.
In a disclosure to the Pakistan Stock Exchange (PSX), FFC revealed that its Board of Directors, during their recent meeting, approved the submission of an Expression of Interest (EOI) and prequalification documents to the Privatization Commission of Pakistan. This strategic move signals FFC's growing interest in participating in the ongoing privatization process of state-owned enterprises, particularly the financially troubled national airline.
The board also sanctioned a comprehensive due diligence exercise to thoroughly assess PIACL's financial, operational, and legal standing before any final investment decision. The official disclosure was signed by Brig Khurram Shahzada (Retd), Company Secretary of FFC, and filed in accordance with Sections 96 and 131 of the Securities Act, 2015, and Clause 5.6.1 of the PSX Rule Book.
Pakistan's Fauji Fertilizer seeks entry into aviation, eyes PIA acquisition
Industry analysts view this cross-sector interest as a bold diversification strategy for one of Pakistan's leading fertilizer manufacturers. If it proceeds, it would mark a rare entry of an agro-sector giant into the aviation industry, potentially setting a precedent for other corporates to explore similar opportunities.
This development comes as the federal government accelerates efforts to privatize loss-making state-owned enterprises under its broader economic reform agenda. PIACL, burdened by mounting debts, operational inefficiencies, and persistent financial losses, has remained on the privatization list for several years.
A previous privatization attempt in late 2024 collapsed after receiving only one bid of Rs?10 billion, far below the government's reserve price of Rs?85 billion. Investor confidence was undermined by PIACL's heavy debt burden, an 18 percent sales tax on new aircraft, and a lack of clear financial safeguards. The failed effort cost the exchequer $4.3 million in advisory fees and forced the government to reassess its strategy before re-launching the process in early 2025.
As part of its renewed privatization push, the federal budget for 2025–26 introduced a major incentive, granting GST exemptions on aircraft imports and leases, effective retroactively from March 19, 2015. The waiver covers complete aircraft (purchased or leased), spare parts, maintenance kits, simulators, engines, and key Maintenance, Repair, and Overhaul (MRO) equipment. This broad tax relief aims to ease PIACL's financial burden, improve operational capacity, and enhance its appeal to private investors.
Market observers believe that FFC's interest could inject much-needed momentum into the privatization drive and encourage other institutional investors. In its commentary, AKD Securities noted that this follows the government's major restructuring of the national carrier, carving out net liabilities of PKR 654 billion and non-core assets into PIA Holding Company Ltd. (Holdco) — effectively transforming PIACL into a debt-light entity. Notably, the airline was EBITDA-positive in CY24, with a reported equity value of PKR 3.6 billion as of December 2024. With PKR 147 billion in cash and short-term investments on a standalone basis as of March 2025, FFC possesses the financial strength to pursue such a transaction, analysts added.
The government's decision to privatize PIACL arises from years of financial losses, mismanagement, overstaffing, an aging fleet, and persistent operational challenges.
Copyright Business Recorder, 2025