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Science & Technology
Saudi Pak Industrial and Agriculture Investment Co


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From Shamim Ahmed Rizvi, Islamabad
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 Zahir said.

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 consecutive year.

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 primary market.

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 estate business.

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 quite successful.