From Shamim Ahmed
May 08 - 21, 2000
Saudi Pak Industrial and
Agricultural Investment Company (Pvt) Limited, a joint venture of Pakistan and Saudi
Arabia has maintained its record and managed to post substantial improvement in its
operational and financial performance despite sluggish economic conditions during 1999.
In an exclusive interview to Page, the Chief Executive of the
company, Rashid Zahir said that 1999 was a tough year, considering particularly the slow
economic growth, slack demand for corporate credit and weak capital market.
Notwithstanding, Saudi Pak accomplished increase in loan approvals to Rs. 918.0 million
and disbursements to Rs. 578.0 million in 1999 as compared to Rs. 305.0 million and Rs.
470.0 million in 1998, he told. The success in attracting increased business owes to the
focused approach of the company to its core business, Zahir said.
Highlighting the areas of strength, he said that our loan portfolio
improved in terms of quality as shown by a rise of 23.9 per cent in loan recoveries to Rs.
611 million in 1999 from Rs. 493.4 million in 1998. The current dues collection ratio went
up to record high level of 93.1 per cent. The achievement of high collection ratio at a
time when some of the industrial sectors like cement and sugar performed poorly is a
tribute to our rigorous selection of projects for financing and the intensive monitoring
system, he added.
He said that foreign currency deposits received a set-back owing to
redemption of deposits on maturity. The redemption of swap foreign funds contributed to
reduce the asset base of the company.
Responding to a question, Zahir pointed out that Saudi Pak has
sharpened its focus on short term money market operations. Borrowing was handled more
efficiently in the scenario of falling cost of funds in 1999. This helped us to mitigate
the adverse effects of reduction in swap deposits during the last two years", Rashid
He said that Saudi Pak's long term entity rating of AA (Double A) has
been upgraded to AA+ (Double A plus) by the credit rating company DCR-VIS Credit Rating
Company Limited, an affiliate of Duff & Phelps of USA. He further said that the recent
upgrade is significant because the rating of the company has been upgraded for the third
Asked what new sectors to which Saudi Pak was offering loans he said
value addition in textile, engineering, chemicals and information technology were
receiving more attention.
To another question, he said that the majority of the cases involved in
litigation have reached a stage where the final solution is in sight. Adequate provision
has been made on doubtful loans in the accounts, he added.
The stock market in Pakistan is picking up. In the wake of falling
rates of return and increased liquidity with them, the local institutional investors are
now active in the stock market. The emergence of strong support from local banks is
expected to provide the requisite confidence and stability to the market, he said.
He pointed out that there was little activity in the primary equity
market and indicated that Saudi Pak is prepared to play its role in the revival of the
Rashid Zahir said that Saudi Pak Tower in Islamabad which has sound
arrangements for security environment and houses prestigious national and international
organizations has been awarded ISO 9002 certification. The building is owned and managed
by Saudi Pak. However he said that Saudi Pak did not have any plan to enter into real
Saudi Pak achieved total income of Rs. 964.5 million and earned net
profit of Rs. 326.0 million in 1999, up 23.5 per cent and 86.6 per cent respectively over
the previous year. Return on shareholders equity stood at 12.5 per cent and return on
assets, 3.5 per cent in 1999.
Spelling out the future business prospects, the chief executive of the
company said that Saudi Pak's financial health is excellent. We aim at continuously
improving the asset quality and achieving sustainable levels of financial performance. He
said that Saudi Pak is in the process of setting up an advisory and consultancy division
to deal with the assignments in financial restructuring, funding strategies, fund raising,
placements and IPOs and mergers and acquisitions.
He also expressed his company's interest in acquisitions particularly,
a retail bank. He believed that Saudi Pak's experience in acquiring a leasing company
(Standard Chartered Mercantile Leasing Company renamed) as Saudi Pak Leasing in 1997 was