The future of leasing sector linked with revival of
By SHABBIR H. KAZMI
Dec 18 - 24, 2000
Pak Gulf Leasing was a late entrant in leasing
sector. It commenced operations at a time when the country was facing
recessionary trend. However, it has exhibited sustainable growth and
persistent profitability. This has been mainly due to the vision of
the management and the able guidance of Inam Ellahi Sheikh. Ather Syed
was appointed Chief Executive Officer of the Company in May 2000.
Though the year 1999-2000 was not very different
from the previous years, profitability of financial sector in general
and leasing companies in particular remained under pressure due to
declining repayment ability of borrowers. However, Pak Gulf registered
an increase in net investment in lease portfolio and net income for
the year improved by nearly 17 per cent over the previous year.
The Company has been regularly paying dividend to
its share holders. The Board of Directors have proposed 9 per cent
dividend for the year ending June 30, 2000. It has paid 9.5 per cent
dividend for the previous year. Earning per share of Pak Gulf shows a
sustainable growth. It was Rs 0.82 as on June 30, 1998, Rs 1.04 as on
June 30, 1999 and improved to Rs 1.16 as on June 30, 2000.
The Company has always stressed upon post
disbursement monitoring. Recoveries are of extreme significance for
any lender and in this connection the performance of Pak Gulf has been
satisfactory. The lease portfolio consist of good quality assets with
timely rental collections. This enviable performance starts with
following stringent selection of clients and prudent risk management.
This has enabled the Company to avoid any provisioning against
doubtful lease and there is not a single bad debt.
Till early this year Pak Gulf was not a borrower
and was depending on its own resources. After June it has acquired
credit lines from Askari Commercial Bank and Pak Libya Holding Company
as well as from money market. Net investment in lease during the year
ending June 30, 2000 was Rs 121.5 million as compared to that of Rs
114 million for the previous year.
According to Ather Syed, "Pak Gulf has plans
to diversify its leasing activities and undertake micro leasing
business." The competition among the players is increasing with
the entry of other financial institutions. Lately, some commercial
banks have also entered in the leasing business. Commercial banks,
being the primary source, enjoy an advantage. Their cost of fund is
lower and are therefore able to underwrite lease at a lower margin.
Ather's suggestion is, "If commercial banks wish to underatke
leasing business they should either extend credit lines to existing
leasing companies or form strategic alliance with them."
Ather also expressed his apprehension regarding
shrinking spread. However, he was very optimistic about the outlook of
leasing sector. He said, "The efforts of current economic
managers have started yielding results. With the disbursement of first
tranche under stand-by arrangement with the IMF, bright prospects for
concluding long-term funding arrangement and restructuring of
Pakistan's external debts, investors confidence is being restored.
There has been an improvement in capacity utilization in textile
sector. Fertilizer sector needs capacity addition and expansion in PSF
sector is already on the cards. textile industry needs to revamp its
infrastructure to get ready for the quota free trade. Its needs for
funds is urgent because BMR, expansion and new addition must come on
line before the year 2003 ends."
As regards meeting to the paid-up capital
requirement, Ather said, "While probability of acquisitions may
be low, mergers cannot be ruled out. At the same time Securities and
Exchange Commission of Pakistan must keep capital market scenario in
mind while making any decision. The management of Pak Gulf is
monitoring the situation very closely as well as exploring the various