The government will bring in over $1 billion by selling its 609-million-share stake in Habib Bank Ltd (HBL), a deal that would surpass the equity capital market transactions of OGDCL ($813m) and PTCL ($898m). HBL is a sound bank, with the largest asset base, widest footprint and profitability ratios to be envious. The other option could have been the restructuring and revamping of the HBL business model, making it a viable institution, and thus bolster revenue streams in the long run. But that would have been a little farfetched for this government to pull off. The easier and more secure thing to do was to cut the strings. In anticipation of the deal, stock prices went up. Hopefully optimistic expectations will continue. Of all the shares, 75 percent have been offered to foreign investors and it will bring $746 million to add to the foreign exchange reserves. Expect Ishaq Dar to be boasting of another success pretty soon.

Now for the bad news. Selling ones best assets at hefty discounts is not a matter of pride. The government is now on its way to offload its entire 41.5 percent holding in HBL, at a floor price of Rs166/share. The floor price shows that it is a distress sell. There is hardly a problem to be found in HBL numbers – which is why such a low floor price is disappointing. One has to go back to March 2014 to find a lower market share price for HBL. The fair value estimates for HBL are at Rs200/share. The government has made the price so low so that the sale is a sure thing. It makes a large sale, and no body is the wiser, except anyone who knows their stocks from their bonds.

HBL is a constant dividend paying company, and earnings are expected to grow. The government of Pakistan could have easily made around Rs7-8 billion annually in dividends. The have let go of a revenue stream for a one-off gain, that too, which could have been at a higher asking price. Why? Because the government has not long term plans. They want to sell to finance the fiscal deficit and the next government can just handle the blame for the low revenue stream.