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Habib Bank Limited Bank’s President Zakir Mehmood in connivance with top functionaries of the former government minted Rs 1.13 billion through allotment of the bank’s shares.

As per announcement of the Privatization Commission of Pakistan, about 52 million shares of the bank were to be allotted at the rate of 235 shares each among the public through draw.

The rules framed by the privatization commission, Security and Exchange Commission of Pakistan and all the three stock markets of the country were fully overlooked and only over 41 million shares were allotted through widespread malpractices in the draw process.

Later the remaining 10 million shares were allotted to their favorite agents through underhand arrangements. These shares were sold out when the price of one share rose to Rs 345 in the market.

The privatization commission had set the target of recoveries at Rs 12.16 billion. The bank received offers to the tune of over Rs 12.5 billion from 434523 investors among them 393723 investors extended offer for purchase of 100 shares, 21283 investors for 200 shares, 3475 investors for 300 shares, 1845 investors for 400 shares, 3415 investors for 500 shares and 781 investors extended offer to purchase multiple shares.

The offers were received beyond the set target but in defiance of all the rules and regulations, 38 million shares were allotted to all the 434121 investors at the rate of 100 shares each, 994500 shares to 3315 investors at the rate of 300 shares each, 702400 shares to 1756 investors at the rate of 400 shares each, 6394500 shares among 12789 investors at the rate of 500 shares each were allotted under the aegis of THK private limited company at Habib Bank Plaza Karachi on August 14, 2007.

Overall over 53 billion shares were allotted in the draw but later the allotment over 100 share holders was cancelled and notification to the effect was issued that 100 shares per each would be allotted to all the investors. This way overall 41 million shares were sold out and over 10.03 million shares were left unsold. These shares were allotted to the favorite agents’ underhand.

The underhand allotted shares were sold out when the price of per share went up to Rs 345 in the stock market and those behind this deal accumulated Rs 1.13 billion through unfair means. The last price of the share was set at lower level than market value to serve the personal interests.

Had the rules been implemented the shares would have been allotted to all investors who had applied for 400 shares in accordance with the fixed for them as per rules without any draw. The rules for sale of HBL share were worked out by manager Global Securities Pakistan Limited nominated by Privatization Commission.

Zakir Mehmood, President of HBL, was proprietor of this company. The approval with regard to rules for sale of HBL shares was obtained from SECP after the approval of all the three stock exchanges of the countries. It was mandatory to seek approval from SECP as well as three stock exchanges in order to make any amendment the respective rules. But no such approval was sought prior to cancellation of shares of the shareholders who had purchased more than 100 shares each.

Through arbitrary decision, the allotment was cancelled and shares were saved which were sold out at higher price later but they were shown to have been sold out at old rates through deceitful tactics.

Had the rules approved by SECP and all the three stock exchanges related to offer for sale of HBL shares being adhered to, then all the shares offered for IPO would have been sold out. It is clearly laid down in section 5 of part 2 of rules for sale of HBL shares pertaining to sale of shares that 100 shares per each be allotted to all the applicants no matter for how much shares they had applied for. As for the remaining shares are concerned shares in desired quantity be allotted to applicants who have applied for 200 shares each.

If shares are left unsold even after allotment of 200 shares per each to the applicants then these will be allotted in desired numbers to the investors who have applied for 320 shares each. If shares fall short then the allotment will be made through draw. Even after allotment of 320 shares per each if the shares are left unsold then these be allotted among the investors who have applied for 400 and 500 shares per each as per said procedure. If offered shares are left in arrear after their allotment in proportion to 400 to 500 shares each then these be allotted on the principle of equality to the investors who have applied for multiple shares.