Pakistan has successfully executed its first major privatization deal of PIA

According to a report from Topline Pakistan Research, Pakistan has successfully executed its first major privatization deal in nearly two decades, with the privatization of Pakistan International Airlines (PIAA), valued at Rs135bn (US$480mn). To highlight, this is one of the largest privatization deals in Pakistan’s history.

The winning bid was submitted by the Arif Habib Consortium (AHC), led by Arif Habib Corporation Limited, and it includes Fatima Fertiliser Company Limited, AKD Group, City Schools, and Lake City Holdings Limited.

The transaction involved the divestment of an upfront 75% stake, with the remaining 25% structured as a three-month call option for the new investor at a 12% premium, with payment due within 12 months.

The 92.5% of the bid value will be invested in the PIAA business, and the remaining 7.5% will be given to the government/holding company of PIAA. The idea behind injecting a large chunk into the industry is the high capex requirements to turn around the flagship national carrier and increase the overall fleet size.

The consortium can add a maximum of 2 more investors; however, only after meeting the stringent criteria and obtaining Government approval. The winning consortium can also select a new partner who was not part of the consortium earlier.

First Round of Bidding Result:

In the first round of bidding, the Lucky Cement Consortium (LCC) bid value was Rs 101.5 bn (US$362.5mn), the Arif Habib Consortium (AHC) bid value was Rs 115 bn (US$411mn), and the Air Blue Consortium bid value was Rs 26.5 bn (US$94.6bn).

The reference price approved by the privatization committee was Rs 100 bn. Since two bids exceeded the reference price, the auction moved to the second round, with the consortium qualifying for it: LCC and AHC.

Second Round of Bidding

The second round started with a base price of Rs115bn (the highest of the first round), with a minimum price increase of Rs250mn per bid. The second bid round concluded at a bid value of Rs135bn, 35% higher than the reserved price of Rs100bn. The bidding continued for multiple rounds, after which the Arif Habib Consortium emerged as the winning bidder.

Our view

We believe the bid value has significantly surpassed the market expectations of Rs 80-100 bn. The potential for a turnaround in PIAA is quite significant, given its landing rights at over 78 destinations and 170 slots. Furthermore, this is the national airline of the world’s 5th most populous nation.

We also mentioned privatization of PIAA in our annual strategy 2026 as one of the triggers for the market to touch the 203k index level by Dec 2026. In our view, the successful privatization of PIAA will boost the morale of the privatization ministry and set the tone for the next companies up for privatization, i.e., DISCOS.